The Washington Post takes a prolonged look at the IRS’s panel of art world experts who volunteer their time to offer appraisals on works whose value is disputed. The panel meets twice a year.
The panel’s meeting room is something of a black box; deliberations are a closely held secret, for the simple reason that tax returns are private. Panelists and IRS employees are forbidden from disclosing the particulars of individual cases. And to keep panelists honest, the documents they receive are carefully redacted. “We’re not told who the taxpayer is, we’re not told who the appraiser is, we’re not told if it’s donation or for an estate,” says Tunick. “It’s really a well-done methodology that they follow.”
Works are considered in alphabetical order by artist, which ensures that multiple works from a single taxpayer are still considered on an individual basis. The panelists with the most expertise in the relevant area take the lead, soon bringing the room into consensus. According to Joseph Bothwell, who from 1978 to 2011 rose through the ranks of Art Appraisal Services,the proceedings move with the speed of an auction. The panel “could get through about 600 items in a day,” he says.
One of the more famous cases that came before the panel was Ileana Sonnabend’s Rauschenberg combine, Canyon. The art work contains a taxidermy golden eagle, the sale of which is prohibited by US law. Nonetheless, the panel valued Canyon at $65m.
The decision seemed like a Catch-22, the painting couldn’t be sold but the estate would have to pay tax on the value it could never realize. The estate’s lawyers complained bitterly and publicly about the absurd situation the IRS had put them in.
The Washington Post slyly reveals one of the important reasons the IRS has the panel: worldly dealers like Howard Rehs, who writes a regular newsletter that includes a feature called The Dark Side detailing misdeeds by folks in the art trade, know the kinds of tricks that might easily be used to accomplish a sale.
Rehs wryly dismisses the work’s precarious legal perch. “I don’t know. If I owned the piece, what would I do? Take the bird off!” he says. “I’ll donate it to you after. I’ll give you the bird after, right?”
In the end, Sonnabend’s lawyers came up with a clever solution whereby the work was donated to MoMA but the estate did not seek a deduction. Everybody won.
The secretive panel of art experts that tells the IRS how much art is worth (The Washington Post)