The $40 Million Albatross

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.

Comments are closed.

  1. InsipiD

    I think it would be best to have the IRS prove the work’s value in court with experts. The owner has already properly appraised it and it sounds reasonable.

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  2. richtaylor365

    I have mentioned before that the highest tax increase in history is set to take affect Jan 1st, 2013, and part of that increase includes the estate tax. Those unlucky enough to die next year will suffer a 55% with a lifetime individual exemption of $1 million (this year it is 35%/ $5 million individual exemption). There is not a more glaring example of organized crime then the theft perpetrated by the IRS in the name of our government on the estates of the deceased.

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  3. Biggie G

    InsipiD,

    From the article:

    That figure came from the agency’s Art Advisory Panel, which is made up of experts and dealers and meets a few times a year to advise the I.R.S.’s Art Appraisal Services unit. One of its members is Stephanie Barron, the senior curator of 20th-century art at the Los Angeles County Museum of Art, where “Canyon” was exhibited for two years. She said that the group evaluated “Canyon” solely on its artistic value, without reference to any accompanying restrictions or laws.

    It also goes on later to say that the IRS is completely free to disregard the value the panel gives.

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  4. Kimpost

    Isn’t the IRS the only government entity that operates off of the “presumed guilty” standard?

    If not the only, then at least one of the few. Interestingly enough the IRS (and equivalents) seem to handle things similarly all over the world. It’s the same here. We have to prove our innocence too.

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  5. CM

    The ultimate insult to injury isn’t it (if death can be considered ‘injury’!). Not only have you lost a loved one, you’ve got to fork over a whole lot of money to a party that has no relevance to what has happened, for no reason whatsoever. Why doesn’t the government also send someone to kick you in the shins at the same time?
    Nothing is being generated or transacted. Nobody is harmed by the act of people inheriting shit. There are no negative externalities to mitigate. So I don’t see how it is even remotely a logical point at which to take tax.
    Notwithstanding that we don’t have this tax (anymore), our IRS is exactly the same.

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  6. InsipiD

    It also goes on later to say that the IRS is completely free to disregard the value the panel gives.

    I don’t doubt that someone could put a value on the piece, but it has to be 0 if the item can’t be legally sold (I’m guessing it can’t be legally exported). Unless it can be sold, the IRS can’t assign a value to it.

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  7. Mississippi Yankee

    I have mentioned before that the highest tax increase in history is set to take affect Jan 1st, 2013, and part of that increase includes the estate tax.

    Not if we put a billionaire in the WH.

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  8. Biggie G

    I don’t doubt that someone could put a value on the piece, but it has to be 0 if the item can’t be legally sold (I’m guessing it can’t be legally exported). Unless it can be sold, the IRS can’t assign a value to it.

    You’d think that wouldn’t you? They have decided that someone needs to pay, and they will. They can’t even donate the piece to the museum where it is now because they can’t take a deduction on it. Read the whole article. It’s as messed up as US copyright law.

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