Update: Sonnabend Estate/Rauschenberg’s Collage “Canyon”

Fellowappraiser Francine Proulx sent me a recent Forbes article following up on the Sonnabend estate tax issue with the Rauschenberg Canyon collage.  Click HERE and HERE for background if you have not been following the trade press about the tax status of the restricted collage.

Forbes states

The lesson is that Scenario Planning, in the face of possible reactions by the IRS, is necessary to give owners of art and collectibles options. Scenario Planning is apt for planning for artwork and collectibles because it allows the owner, and their advisers, to answer the feed-forward question “what could possibly happen?” and then take steps to avoid risks and seize opportunities. The owners, and their families, have alternative plans when the primary plan fails to cope with negative situations. (For a more in depth discussion of using Scenario Planning see “Scenario Planning Option For Clients’ Estates“. Here is a simplistic example:

1. Prior to her death, Mrs. Sonnabend revises her estate planning documents so that the piece “Canyon” goes to her heirs, but if they disclaim, “Canyon” is donated to the MET. The Personal Representative is also given authority to abandon, modify or destroy “Canyon” in the settlement of the estate.

2.  The Estate applies for a valuation of “Canyon” to the art Advisory Board. The Board comes back with a decision that “Canyon” ’s fair market value is $65 Million, the family now has the following options:

a. Keep “Canyon”, and pay the taxes, because ownership of this (now very famous) artwork is worth it to them,

b. Disclaim their interest in “Canyon” in favor of the MET, and takes the full $65 Million as a charitable deduction in the estate ,

c. Have the Personal Representative go to the MET, saw the eagle off the painting, leave the eagle on the floor, and get a new appraisal for the modified artwork, or

d. Have the Personal Representative takes “Canyon” out into the front steps of the MET and burn it in protest of estate taxes, and show it as a loss incurred in the administration of the estate.

Although the last two suggestions seem outlandish, they are no more outlandish than the plan to get the IRS, and the Courts, to accept that the ownership of such a major work by a renowned artist is worthless just because you cannot sell it. Also, there is a lot of chutzpah to argue in this day and age of the 99% that that the “rich” can inherit something for free!

Source: Forbes