Fellow appraiser Xiliary Twil of Art Asset Management Group, Inc sent me a follow-up post to the interesting Forbes article on the IRS issues over the Ilena Sonnabend estate and the un-marketable collage by Robert Rauschenberg. The values placed on the collage by appraisers was 0 because of the inclusion of a bald eagle in the piece and the IRS placed a value of $65 million because of "black market value". Click HERE to read the initial post on this interesting story.
The follow up is from an e-zine called The Trust Advisor. The Trust Advisory states as strange as the Sonnabend situation is, it is not unique. It states the IRS has a track record of taking a hard line on taxing contraband in estates.
The article is well worth taking a few minutes to read.
Source: The Trust Advisor
Sonnabend’s lawyers are suing for relief from the double jeopardy the IRS has put them in, but the shocking thing is that while their case is bizarre, it’s not unique.
The IRS has taken a hard line that contraband they find in estates is still taxable even though there’s no legal market for the firearms, hard drugs or stolen art.
As such, the heirs have to liquidate legitimate property in order to give the government its cut or else run the risk of being caught lining up illicit buyers.
Even in cases where the contraband can’t be sold — for example, when the drug smuggler crashed his plane and his 600 pounds of marijuana were seized and destroyed — the IRS still wanted its cut from the heirs.
Giving people an incentive to commit crime is especially ironic when you consider that the IRS has proved that it’s eager to look the other way when people hire illegal aliens, provided once again that the employer fills out the paperwork.
“It’s exactly this type of ridiculousness that makes the IRS the most reviled of all the government agencies,” says Colorado tax pro Tony Nitti.
“The service is taxing the estate on the hypothetical purchase price a piece of art could fetch on the black market, even though such a sale would constitute a federal crime.”
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