Fellow appraiser Denise Levy of Art Find Associates in NYC sent this comment to me about the post and statistics from the IRS Art Advisory Panel. Denise has a great article coming out in the Journal of Advanced Appraisal Studies - 2009 on The Challenges of Appraising Photographs.
Denise said "Just a footnote to the Art Advisory IRS Panel, many art appraisers won't do charitable gift any longer because of the lack of cooperation on the part of art dealers to divulge sales information. The IRS allows and encourages getting that information from the auction markets, always has, but those results are often flat, more than half of what an art work would fetch in the open market."
It has always been a challenge to get accurate comps from dealers. Victor Wiener wrote an article in the 2008 edition of the Journal of Advanced Appraisal Studies called Appraising Art in the Stratosphere. He made the point that many record prices and published reports dont tell the whole story of the sale price. There can be all sorts of financial considerations and exchanges that impact the final price, many of which are not publicized.
It is a good idea to keep dealer relationships strong. Visit shops, galleries and show dealers on a regular basis and network so you have the contacts to get the proper valuations for the proper market. Markets and market analysis is so important in qualified appraising right now. If you are going to build a case for FMV outside of documented auction sales, and there is potential for review by the IRS, you comparable documentation from dealers needs to be strong as well as a strong explanation and description of what constitutes the most common market.
We are getting some great comments on the Art Advisory Panel post. The one aspect I found very interesting about the statistics was that out of the 131 cases reviewed by the panel, only 11 were for charitable donations. The moral of this story is to be prepared for high dollar estate tax reviews.
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