Art Law by Ann Avery Andres, Esq.
T'is the Season to be Giving
This is the season when art collectors might be thinking of two things: gifts and end of the year tax write offs. What are the tax advantages of giving artworks and how does the giver take advantage of them?
Section 170 (a) of the Internal Revenue code (IRC) allows deductions on federal income tax returns on part or all of the appraised value of a gift to a 501 (c) (3) organization. Most museums qualify as a 501 (c) (3) organization, but it is important to check that the recipient of your artwork gift has this tax designation.
Art is described by the IRS as "paintings, sculptures, watercolors, prints, drawings, ceramics, antique furniture, decorative arts, textiles, carpets, silver, rare manuscripts, historical memorabilia and other similar objects." If you would like to gift any of these items and to receive a deduction on your income tax return, the key is to have the artwork appraised for its FAIR MARKET VALUE AT THE TIME THE GIFT IS GIVEN. If the value of the gift is under $500.00, no such appraisal is required. But for art items valued above $500.00, it Is necessary to provide the appraisal and IRS form 8283 entitled "Non Cash Charitable Contributions." If the art item exceeds $20,000,00 in fair market value, it is also necessary to include a color photograph of the item (8 x10 inches) or a transparency (4 X 5 inches).
The appraisal must meet the following requirements: include the appraiser's qualifications, statement of value and definition of value, basis of appraisal, date: property was appraised and the signature of the appraiser, a complete description of the art including subject matter, medium, artist, creation date, interest transferred, cost, date and manner of acquisition, history of the art including proof of authenticity, if available, and a statement of factors upon which the appraisal is based,
The IRS has an Art Advisory Panel authorized by the Treasury Department. This is a committee of voluntary art experts who advise the IRS about the value of particular works of art. If the artwork is $50,000,00 or more, the giver may obtain a pre-transfer, prefiling Statement of Value from the IRS for a fee.
There are substantial penalties if the appraisals you submit are over or under valued. It is important to have a qualified appraiser do the evaluation of any art objects you may gift to a charitable organization. The cost of the appraisal is a tax deduction under 212 (3) of the IRC.
Charitable contributions are deductible only after delivery of the gift and upon the giver parting with dominion and control of it.
Recently, there have been several interesting estates involving
art and art appraisals including the estates of O'Keeffe, Rothko, and Warhol.
As you can imagine, differences as to fair market value often occurs. In
order to obtain the maximum tax advantage of your gifts of art objects,
the appraisal is the key factor. HAPPY GIVING AND HAPPY HOLIDAYS.
© Ann Avery Andres, 1999
Ann Avery Andres practices law in Santa Ana,CA. She may be reached at 714.558.7775. Her address is 322 West Third Street, Santa Ana, CA 92701.
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Resource Library Editor's note: Laws regarding the content of this article may have changed since it was published in 1999. Please seek legal counsel for current information.
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