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Part 4. Examining Process

Chapter 48. Engineering Program

Section 2. Valuation Assistance for Cases Involving Works of Art

4.48.2  Valuation Assistance for Cases Involving Works of Art

4.48.2.1  (01-01-2006)
Art Appraisal Services Overview

  1. The Office of Art Appraisal Services of Appraisal Services under the Chief Appeals (AP:ART) reviews fair market value claims on works of art and cultural property in cases under examination and manages the Commissioner's Art Advisory Panel.

  2. When a tax return has been selected for audit which includes art or cultural property valued at $20,000 or more, the IRS local office must refer the case to Art Appraisal Services.

  3. Art Appraisal Services art appraisers provide valuation assistance on works of art and other collectibles in taxpayer cases not referred to the Panel. This includes art work valued at under $20,000 (in special cases), as well as works in specialty areas outside the expertise of the Panelists, such as historical artifacts, ancient art, archival material and manuscripts, and other personal property.

4.48.2.1.1  (02-20-2001)
Art Advisory Panel

  1. The Commissioner maintains an Art Advisory Panel of nationally prominent art museum directors, curators, scholars, art dealers, auction representatives, and appraisers to systematically aid the Service in the review of Service-selected cases involving taxpayer valuations on art objects, principally American and European paintings and sculpture.

  2. The Office of Art Appraisal Services (AP:ART) under the Chief Appeals provides the staff support and coordination of the Panels’ functions.

  3. The Panel members, after reviewing photographs or color transparencies, along with relevant documentation provided by the taxpayers and research by the staff appraisers, make recommendations on the acceptability of the claimed values. If unacceptable, the panelists make alternate value recommendations. Such recommendations are advisory only; however, after review by the Office of Art Appraisal Services, these recommendations become the position of the Service.

  4. Reconsideration of Value Determinations. If agreement cannot be reached with the taxpayer, further assistance may be requested of the Panel and the Office of Art Appraisal Services. The taxpayer may request reconsideration of an adjusted claimed value only if they provide additional evidence such as comparable sales data or other relevant facts to support their fair market value opinion. The taxpayer’s request must respond specifically to the report issued by the Art Office.

  5. Further Assistance. The art appraisers will provide assistance to the Operating Divisions, Appeals and Chief Counsel. Upon request, the designated appraiser may participate in taxpayer conferences, may prepare a detailed expert report for use in Tax Court trials, and may testify as an expert witness in support of the report or may assist in procuring outside experts and/or Panelists.

4.48.2.2  (02-20-2001)
Criteria for Requesting Art Valuation Assistance

  1. The term "art" includes paintings, sculpture, watercolors, prints, drawings, ceramics, antique furniture, decorative arts, textiles, carpets, silver, rare manuscripts, historical memorabilia, and other similar objects.

  2. Any taxpayer’s appraisal of a single work of art with a claimed value of $20,000 or more must be referred to Headquarters for review by the Commissioner’s Art Advisory Panel and Art Appraisal Services.

  3. Telephone discussions with the Art Appraisal Services are encouraged in order to take advantage of expert advice and to facilitate the handling of all referrals, for valuation assistance in these instances.

4.48.2.3  (02-20-2001)
Referral Procedures for Requesting Assistance in Art Valuations

  1. Requests to Art Appraisal Services for assistance in art valuation matters should follow Territory/District procedures and be addressed to: Internal Revenue Service, Art Appraisal Services, 1099 14 th Street, NW, Suite 4200E, Washington, DC 20005, ATT: AP:ART.

  2. Examiners requesting valuation assistance on works of art should include in their referrals the following information necessary for determining the fair market value (FMV) of each object.

4.48.2.3.1  (01-01-2006)
Information Needed for Art Valuation Requests

  1. A completed Form 5202 (Request for Engineering Services) or memorandum. It is extremely important that the name, address and phone number of the requestor is provided. Please also include the valuation date on this form.

  2. A complete description of the item of art, including:

    1. Name of the artist or culture,

    2. Title or subject matter,

    3. Medium, (oil on canvas, or watercolor on paper, etc.),

    4. Date created,

    5. Size,

    6. Any marks, signatures, or labels on the item,

    7. History (provenance) of the item,

    8. Exhibition record of the item,

    9. Reference source citing the item, and

    10. The physical condition of the item.

  3. A professional quality photograph of a size and quality fully showing the item, preferably an 8 x 10 inch color photograph or a color transparency not smaller than 4 x 5 inches.

  4. The facts on which the appraisal was based or specific basis for the valuation, such as: sales and analysis of similar works by the artist, particularly on or around the valuation date and the state of the art market at the time of valuation, particularly with respect to the specific property.

  5. Any additional information that may affect the determination of the fair market value of the item of art.

  6. The valuation date.

  7. Cost, date and manner of acquisition.

  8. Information on disposition (if the item has been sold) or present location on the object (if it becomes necessary to arrange an inspection).

  9. Claimed FMV and a copy of the appraisal materials filed with the return.

  10. Charitable contributions must meet the requirements for a qualified appraisal under IRC §1.170A-13(c)(3)(i)-(iii) and must also include the following:

    1. a completed Form 8283 (Noncash Charitable Contributions), and

    2. an acknowledgment letter from the donee.

  11. Any pertinent factors gathered as to the accuracy of the claimed FMV should be set out on a separate page in the request.

    Note:

    While the items listed in subparagraphs (2) – (11) represent the ideal informational background required for valuation determinations by Art Appraisal Services, it is understood that each item of information will not be readily available in every case. However, it is emphasized that the validity of the FMV findings and recommendations by the Art Advisory Panel are greatly enhanced and facilitated by complete and accurate information. Scant information hinders or in some cases precludes meaningful consideration.

  12. Items Valued at under $20,000. The Office of Art Appraisal Services is also available to provide telephone assistance to examiners in determining the FMV of many objects of art that have return values of less than $20,000. Examiners are encouraged to take advantage of this expert advice for such items as paintings, watercolors, prints, lithographs, etchings, drawings and sculptures. The valuation specialists in Art Appraisal Services may be reached at (202) 435–5609. However, prior to making a telephone call to discuss the value of any item, the examiner should ascertain as many as possible of the following:

    1. Name of artist

    2. Description of item including: the medium, title, size, date created, and any distinguished marks, symbols or labels

    3. Date acquired by taxpayer

    4. Valuation date

    5. Cost of acquisition

    6. Claimed FMV

  13. If a questionable individual item appraisal under $20,000 has substantial significance and the aggregate number of dollars in the case is large, Art Appraisal Services, upon request, will also provide, as available, guidance for review assistance.

4.48.2.4  (08-01-2007)
Art Appraisal Services Coordination

  1. The complete referral file from the examiner will be reviewed and researched by Art Appraisal Services prior to referral to the Art Advisory Panel or an appraiser.

  2. A fixed schedule of meeting dates for the Art Advisory Panel has not been established. However, in recent years it has become the practice of the Panel (Paintings & Sculptures) to meet in the National Headquarters not less than twice in any calendar year (March/April and September/October). Notice of these closed meetings are published in the Federal Register usually 6 weeks prior to each meeting date. Requests for valuation assistance should be initiated by January 15th for the Spring meeting and by July 15th for the Fall meeting in order to allow sufficient time for the art appraisal review.

  3. To assist in case planning and control Art Appraisal Services will advise local offices of estimated completion dates, especially when facts and circumstances in specific cases indicate any abnormal delay in the completion data.

  4. In the final disposition of a case by the Office of Art Appraisal Services, recommendations for acceptance or rejection of claimed values will be made to the local offices based primarily on the Panel’s conclusions.

    1. On accepted cases, a closing memorandum will be prepared.

    2. On unaccepted cases, a closing memorandum, usually including a valuation report detailing the findings and recommendations, is prepared on each case referred to Art Appraisal Services for valuation assistance by the office and the Commissioner’s Art Advisory Panel.

  5. Requests for information regarding the status of specific cases referred for art valuation assistance should be directed to our address.

4.48.2.5  (12-07-2007)
Follow-up Procedures

  1. Form 8256. Included with the closing memorandum and report from Art Appraisal Services is a follow-up tracking form, Form 8256.

    1. The appraisal specialists in Art Appraisal Services will fill in Part I of Form 8256, Art Appraisal Field Response, and attach it to the Art Office closing memorandum report.

    2. The Group Manager of any examiner who has received assistance from the Art Office will ensure that the information found in Part I of Form 8256 is updated by completing the Examination portion of Part II immediately upon closing the case.

    3. The updated original Form 8256, with the Art Office closing memorandum and report, will remain in the case workpaper file after being indexed on Examination Workpapers Form 4318 or on Estate Tax Reengineering Administrative Lead Sheet.

    4. A copy of the updated Form 8256 should be forwarded to: Internal Revenue Service, Art Appraisal Services, 1099 14th Street, NW, Suite 4200E, Washington, DC 20005, Attn: AP:ART (Name of Art Appraiser).

  2. To further enhance the valuation assistance provided by Art Appraisal Services, local offices are encouraged to include comments and attach any supporting statements that would be beneficial to the viability of this program.


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