Federal estate and gift taxes cover a wide range of assets that a person might own, and this includes works of art. Art can come in many forms, including paintings, photographs and sculpture, among others. Art can be difficult to value, because it’s not traded on an exchange. Its value is really a question of opinion. It won’t be surprising to learn that those who file estate tax returns for decedents who owned art tend to put a low value on those artworks passing to family members. The IRS, of course, likes higher values. Conversely, where art is passing to charity, during life or at death, the donor will seek a higher value, and the IRS a lower one. To help it resolve disputes about art valuation, the IRS has established an Art Advisory Panel. The Panel recently issued its report for 2007 on its closed meeting activity.

Three closed meetings were held in 2007. Meetings are devoted to specialties in art; two meetings dealt with paintings and sculpture and one with decorative arts and antiques. Several hundred items are reviewed at each meeting, with much research and preparation prior to the meetings. Of the taxpayer appraisals reviewed by the Panel, 36% were accepted as sumitted, while 61% were adjusted.

The Art Advisory Panel is listed in the report. Its members are not IRS employees, but rather well-respected members of the art and museum communities. Taxpayers with substantial value in artworks will need to do their homework to justify the values claimed on estate and gift tax returns, because the IRS has expert resources available to it and is ready and willing to challenge art that is submitted with what it believes are low values.