When on the Resource Panel, I helped write this information on BEST PRACTICES FOR PERSONAL PROPERTY APPRAISERS. All people looking for appraisers should read it!
The Personal Property Owner’s Guide to Appraisal Services, written by members of the Appraisal Foundation’s Personal Property Resource Panel: Best Practices
The IRS requirements for donors of gifts of art to museums can be confusing to the donors, the donee museums, and the appraisers who prepare the donation appraisal reports. Many of the issues were clarified for me in a virtual presentation by IRS counsel and a recently-retired IRS appraiser who worked for the Art Appraisal Services department that I attended. Below are some key take-aways from that meeting:
1. Donors are allowed to have an appraisal report prepared prior to the formal donation date (to be discussed below) but only up to 60 days prior. However, the IRS highly recommends that the report not be prepared until after the donation date. That is because sometimes preparing it too soon will result in missing the most relevant sales comparables, which are the ones closest in date to the donation date. The report only needs to be submitted to the donor in time for them to submit their tax returns for the year of the donation.
2. The IRS actually allows the use of sales comparables that post-date up to two years after the donation date.
3. The FORMAL DONATION DATE is always tied to dates on the Deed of Gift. The donor and the museum both sign this legal document and the date the last person signs it is the formal donation date. The museum’s board collections committee meeting date at which the donation is approved is NOT the donation date. This can cause problems if the objects are year-end gifts but the last signor of the Deed does not do so until after the first of the new year. In those cases, the donation is counted as a gift in that new year and is not a year-end gift.
4. The donation will be disallowed and no tax deduction will be granted if the person who writes the donation appraisal report is not a qualified appraiser according to their criteria, which includes adherence to the principles of USPAP (Uniform Standards of Professional Appraisal Practice), even if the values assigned for the donated objects are correct.
5. An appraiser can put all the items donated to a single museum on the same date into one report, BUT if these are of multiple types of media (paintings, prints, sculpture, photographs. etc.), even if by the same artist, then divide them into “sections” and separate 8283 forms need to be prepared for artworks of each different media. If the total values for one of these groups falls below $5,000, then a formal appraisal report need not be prepared for that group. NOTE: if the same types of objects are donated to multiple institutions and the total values for all these gifts exceeds $5,000, even if those donated to each museum fall below the $5,000 threshold, then appraisals for all are still needed.
6. Appraiser compensation cannot be a percentage of the value of the donated items.
7. The 8283 forms can be signed digitally but the printed report itself needs a “wet” signature.
8. The IRS does not require, but recommends, inclusion of the Deed of Gift in the appraisal report.
9. Comparables should come from the same market type (auction or retail) in which the art was acquired. So, for example, just searching for comparables in auction sales databases is sometimes not sufficient if the art was acquired in the dealer market and dealers should be consulted. And it is okay to cite dealer asking prices to give a general picture of the market for the type of art being appraised, but asking prices should not be used as direct comparables. If the artist’s works are only available in the primary market, that is the market in which to find comparables. But if appraising an older work by an artist, and the demand at the time of the donation is only for the artist’s most recent work, then that issue needs to be discussed and accounted for.
10. Discussion of provenance in the report and dates of acquisition of the art is critical. Lack of this is a red flag to the IRS to look more closely at the donation. The IRS allows increased valuation of art over the purchase price only if owned for a year and a day since the purchase date. Another red flag to the IRS is a huge increase in value after ownership of only a year and a day.
11. Just listing the donated items and their appraised Fair Market Values in an appraisal report is not sufficient, justification for these values need to be discussed in a market analysis section of the report generally and specific comparables need to be listed and their relationship to the donated items needs to be clearly described, with more detail required for higher valued items. The most relevant comparables are usually but not always those with sale dates closest to the date of the donation. If using older comparables, the reasons why need to be clearly stated.
The IRS publications 561 (Determining the Value of Donated Property) and 526 (Charitable Contributions), both available online, contain much of this information, as does the instruction sheets for the 8283 form.
The Japanese newspaper, Yomiuri Shinbun, has just reported (2/8/2021) that "counterfeit prints based on paintings by Japanese masters such as Ikuo Hirayama and Kaii Higashiyama have been circulating in Japan for about eight years... An art dealer in Osaka Prefecture confessed to the Contemporary Graphic Art Dealers Association of Japan (Nippansho) that he sold fake works. Ten works have been confirmed to have been counterfeited so far, but the owner of a studio in the Kansai region who produced the fakes at the request of the art dealer told the Yomiuri, “I printed about 20 copies each of about 40 works.” This indicates that there may be as many as 800 fake copies." article here
The market for Korean art outside of South Korea is smaller than within the country. Only a few auction houses regularly hold sales and other than stellar pieces of ceramics or paintings, prices are extremely low. Auction houses most often include a Korean art section within sales of Japanese arts, for example Bonhams and Christie's. iGavel also occasionally holds sales. An alternative might be to contact the Overseas Korean Cultural Heritage Foundation, whose notice of their interest in purchasing art has recently been featured in Orientations magazine. The Foundation is purchasing rare and meaningful Korean cultural properties that are put up for auction or owned by art dealers and individuals. Their website is here.
