A recent tax court ruling reveals why it is important to hire a formally-trained, dedicated appraiser rather than an auction house specialist or dealer. For the article, see https://procedurallytaxing.com/the-perils-of-a-discredited-appraisal-critical-insights-on-kollsman-v-commissioner/
The article also lists useful criteria for what to look for when selecting appraisers.
The Washington, DC-based Appraisal Foundation also weighed in supporting the court's ruling, stating:
“Consumers are the biggest beneficiaries of this ruling. Personal property assets will be better protected when a qualified and independent appraiser is retained to value one’s personal property assets,” said John Brenan, vice president of appraisal issues at The Appraisal Foundation. “This also means wealth managers and estate attorneys now have a greater fiduciary duty to their clients to fully understand appraiser qualification criteria and appraisal standards when vetting personal property appraisal experts.”
The ruling arises from the case of Estate of Kollsman vs. Commissioner. The Estate hired a premiere auction house to conduct an appraisal of the estate’s art collection. The U.S. Tax Court rejected the valuation of the auction house expert because of bias and a lack of objective evidence. The IRS retained the services of a personal property appraiser, who met the qualifications established by the AQB and completed an appraisal that was compliant with USPAP.
The IRS appraisal expert found two of the paintings were significantly undervalued. The court also found that the auction house expert had a conflict of interest as the appraiser in question also sought to represent the paintings at auction. The 9th Circuit Court took the case up on appeal and agreed with U.S. Tax Court opinion.
Jul 23, 2019
Jun 24, 2019
The website wealthmanagement.com has published an interesting article that discusses why collectors should document their collections: The Importance of Documenting Clients' Art Collections. This is important to do no matter how small your collection. I work with heirs regularly who don't have a clue about the value of art and antiquities they have inherited and they also often get wrong advice when settling their loved-ones' estates. Even if the contents of an estate does not need to be appraised for IRS tax filing, it is always a good idea to get objects assessed so a basis in value can be established as of the person's date of death. That is because if the heirs sell it afterwards, they will have to pay capital gains taxes on the profit. If a basis for value is established as of the death date, then the taxable amount will be lower.