ITK 06 - Win-Win in Court
A difference between price and value…
In 2014, the tax court case Elkins v Commissioner was decided on appeal in a Fifth Circuit court decision. This was a significant landmark case that could prove to have far reaching effects for families with extensive and high value art holdings. Broadly speaking, the issues surrounding this case included effective estate planning in terms of leasing parameters for gifted art, and for fractional ownership interests in art. At the core of the case was: how substantial is the effect of fractional (partial) ownership for artworks and how much should it be discounted. It seems that it boils down to liquidity. If you own a ¼ share of a painting worth $1 million, your ability to sell that share may not be the equivalent of $250,000.00, or will it? The answer is: it depends. In reading the decisions, it seems that when it comes to art, nothing is clear cut.
Effective tax planning for transition and maintenance of personal property is tantamount to knowing what you own and what its value is prior to initiating any program. Start with an appraisal by an independent, experienced and accredited appraiser who will provide a picture of the market-universe and how your property fits into it. This is not an easy thing to do. Appraisal is a process and while professional methodology is always followed, there is rarely a clear-cut pathway that applies to all properties.
And remember, there is a difference between price and value.
