Fair market value of assets held by the estate is key for determining tax liability of an estate. In Estate of Eva Kollsman v. Commissioner of Internal Revenue, taxation of the sale of two 17th-century Old Master paintings was contested in federal tax court. The federal U.S. Tax Court agreed to expert analysis of the IRS’s testimony and opposition to the Plaintiff’s valuation of the two paintings sold at auction as “unpersuasive” and “unreliable.”
Appraisal Below Fair Market Value
The two paintings, Village Kermesse, Dance Around the Maypole (“Maypole”) by Pieter Brueghel the Younger, and Orpheus Charming the Animals (“Orpheus”) by Jan Brueghel the Elder or the Younger were, according to the IRS, worth more than claimed by the estate in the case. “Maypole” was later sold by Sotheby’s New York, Auction Lot. 43 in 2009 for $2,100,000 hammer price. Following Eva Franzen’s death In September 2005, Vice President of Sotheby’s North America and South America, George Wachter appraised the value of the paintings at $500,000 for Maypole and $100,000 for Orpheus, respectively. In his testimony before the Tax Court, damage caused by the decedent’s smoking was reportedly the reason for lower than fair market valuation of the paintings in the estate’s 2005 IRS tax return.
In Kollsman, Notice of Deficiency identifying fair market valuation of Maypole and Orpheus for tax purposes was estimated to be $1,750,000 and $300,000. When the estate petitioned the U.S. Tax Court with a request for redetermination., the IRS responded revaluation asserted of the two paintings at $2,100,000 and $500,000. In 2017, the Tax Court ruled the Eva Franzen Kollsman estate rendered the worth of the artwork $2.4 million undervalue on the tax return.
NY Estate Tax Treatment
New York estate tax treatment is separate from other state and IRS federal tax rate guidelines. Beginning at 5 percent and reaching 15 percent in comparison with the federal estate tax rate of 40 percent, the current state tax policy treats the entire value of an estate that exceeds exemption, rather than merely the exempt amount over the worth of the estate. New York rules to estate tax treatment will be raised to match the federal exemption on January 1, 2019.
Notice of deficiency by the IRS is the preliminary step in legal due process required for suing a taxpayer in court. New York Consolidated Laws, Surrogate’s Court Procedure Act – SCP § 1804 outlines the rules to Contingent or unliquidated claims; retention of assets for estate taxes offering an alternative to liquidation. Find out about estate taxation in your state before the sale of fine art or other high net worth assets. Seek advisory from a licensed attorney at law experienced at representing clients in estate liquidation taxation proceedings.
New York Estate Law Firm
Ettinger Law Firm is a licensed New York attorney practice specializing in estate planning and probate litigation. Contact Ettinger Law Firm to schedule a consultation about an estate or trust law related matter.
See Related Blog Posts
Estate Planning for Art Collections
Fine Art, Antiques and Other Collectibles in Estate Planning