I tweeted about this a couple of days ago, but the more I think about it, the more I see it as the perfect confluence of government stupidity:
Heirs to important art collections are often subject to large tax bills. In this case, the beneficiaries, Nina Sundell and Antonio Homem, have paid $471 million in federal and state estate taxes related to Mrs. Sonnabend’s roughly $1 billion art collection, which included works by Modern masters from Jasper Johns to Andy Warhol. The children have already sold off a large part of it, approximately $600 million worth, to pay the taxes they owed, according to their lawyer, Ralph E. Lerner.
I want you to stop for a moment and think about that. An art collection was busted up because of our wonderful glorious inheritance tax. Keep in mind, there are many countries — Australia, Switzerland, Canada, Sweden (!!) — that either don’t have an inheritance tax or have abolished it. As I noted in the Sunday Six-Pack thread, my Australian bankers were surprised that the US still had one.
Now that alone would make for an annoying story. But it gets better. One work is literally impossible to sell.
The object under discussion is “Canyon,” a masterwork of 20th-century art created by Robert Rauschenberg that Mrs. Sonnabend’s children inherited when she died in 2007.
Because the work, a sculptural combine, includes a stuffed bald eagle, a bird under federal protection, the heirs would be committing a felony if they ever tried to sell it. So their appraisers have valued the work at zero.
But the Internal Revenue Service takes a different view. It has appraised “Canyon” at $65 million and is demanding that the owners pay $29.2 million in taxes.
Plus $11 million in fines for trying rip the IRS off.
Look, this is not rocket science. If you literally can not sell something, the value of it is, by definition, $0. I may think my Dale Murphy baseball card is worth a million dollars. But the real value is whatever people are willing (and legally able) to pay for it. This is not a situation like, say, drug dealers, where the IRS wants a cut of an illegal activity that has already taken place. They want a cut of an activity that can never occur.
Even though they can’t legally do it, I’m hoping that the family will turn around and try to pay the tax bill by letting the IRS seize the sculpture. The resulting bureaucratic entanglement might tear a hole in the space-time continuum. But it would fun to watch the EPA and the IRS fight it out.