IRS wants $29 million in estate taxes for bald-eagle sculpture that … can’t legally be sold

posted at 9:45 pm on July 23, 2012 by Allahpundit

That’s one way to increase tax revenue from the rich. If you can’t get Congress to pass the Buffett Rule, why not just start taxing phantom income instead?

They want their money, even if you don’t get yours.

The object under discussion is “Canyon,” a masterwork of 20th-century art created by Robert Rauschenberg that Sonnabend’s children inherited when she died in 2007.

Because the work, a sculptural combine, includes a stuffed bald eagle, a bird under federal protection, the heirs would be committing a felony if they ever tried to sell it. So their appraisers have valued the work at zero. But the IRS takes a different view. It has appraised “Canyon” at $65 million and is demanding that the owners pay $29.2 million in taxes…

While art lovers may appreciate the IRS’ aesthetic sensibilities, some estate planners, tax lawyers and collectors are alarmed at the agency’s position, arguing the case could upend the standard practice of valuing assets according to their sale in a normal market. IRS guidelines say that in figuring an item’s fair market value, taxpayers should “include any restrictions, understandings, or covenants limiting the use or disposition of the property.”

The owners inherited a cool $1 billion in art from their mother but have had to sell nearly $600 million worth to cover the federal and estate taxes. As for the eagle, they can either (a) keep it and come up with $29 million, (b) sell it and go to jail for that, (c) refuse to pay the tax and go to jail for that, or (d) accept the feds’ valuation and come up with the $29 million, then donate the sculpture to charity and take a relatively small charitable deduction every year for the next … 75 years. I’m honestly curious to see if the IRS backs down now that there’s been some media attention to this or if they figure, as their boss does, that the public’s sufficiently hostile to rich people that they can play hardball here by demanding a tax on an asset that can’t legally generate income. Which way are we betting? Let me know in the comments!


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I can’t imagine why the founders didn’t leave us with an income tax?

Does anybody know how much it costs to operate the domestic terror organization that goes by the acronym I.R.S. ?

Speakup on July 24, 2012 at 12:12 AM

GIVE the sculpture to the IRS – you therefore ‘paid’ the tax, and got to give the IRS ‘the bird’ at the same time.

GarandFan on July 23, 2012 at 9:56 PM

GREAT IDEA!!!

But DONT FORGET to file for a $36 Million REFUND, which is the difference between the $65 Million paid when you gave the IRS the bird, and the $29 Million the IRS said you owe!!!

landlines on July 24, 2012 at 12:14 AM

It is unfair because it taxes things twice. The original possessor of the assets would have already paid taxes on them.

cynccook on July 23, 2012 at 9:53 PM

Only ordinary income would have already been taxed once. But gain on the value of a capital asset (real estate, for instance, or a valuable artwork) would not have been taxed. So, for the most part, except for cash sitting in someone’s estate, it is not a double tax.

acasilaco on July 24, 2012 at 12:18 AM

If the heirs try to fight this in court, they would still have to pay the $29 million up front and then sue to get it back. The IRS would drag that case out for years which would consume still more of the heirs inheritance.

I’m thinking that the IRS is banking on the heirs trying to cut their losses and simply pay.

thatsafactjack on July 23, 2012 at 10:24 PM

Not so, because the representatives of the estate filed a petition in the U.S. Tax Court.

https://ustaxcourt.gov/UstcDockInq/DocketDisplay.aspx?DocketNo=12000649

The rule you are referring to about having to pay the amount first and then sue for refund (the Flora rule) applies in other courts, but not the Tax Court. Here, they can litigate in Tax Court (and potentially appeal to the Court of Appeals and the Supreme Court) before they would have to make the payment. So, that’s good.

I would like to think that this case will be a win for the Petitioner (the estate), but I’m not very good at predicting the outcome of these things. From looking at the court’s docket sheet, though, it looks like the parties may be trying to settle the case without it going to trial. (The parties jointly moved to continue the trial – i.e., to postpone it.)

acasilaco on July 24, 2012 at 12:24 AM

***

So, for the most part, except for cash sitting in someone’s estate, it is not a double tax.

acasilaco on July 24, 2012 at 12:18 AM

I agree with you about the appreciation component of capital assets. But just as you make the point about “cash sitting in someone’s estate,” I think the same thing could be said or assumed for the basis component (immediately before date of death) in a capital assets probably represents income that has been taxed already.

I can’t recall. Regarding the income-tax charitable deduction, it used to be that you get a deduction for the year of contribution and then a 5-year carryover. I seem to recall that Congress made the capital-loss carryover period last indefinitely. Did Congress change that for charitable contributions as well?

BuckeyeSam on July 24, 2012 at 12:38 AM

BuckeyeSam on July 24, 2012 at 12:38 AM

I think you’re right about the basis representing already-taxed income.

I don’t know the answer to your carryover question off the top of my head. Maybe I’ll look it up in the morning. :)

acasilaco on July 24, 2012 at 12:42 AM

Straight. Up. Communism.

We have actually reached the point of indentured servitude and absolute submission.

KMC1 on July 24, 2012 at 1:13 AM

I don’t know how it will go, but it should go that since it can’t legally be sold, then there should be no tax on it. The bigger outcome is that the IRS as it exists today along with income taxes and estate taxes should go away. Estate taxes are confiscatory and IMHO illegal as well–da’ gubmint should have no right to tax people’s estates like that and We The People ought to initiate and pass a Constitutional Amendment to stop that nonsense.

stukinIL4now on July 24, 2012 at 1:24 AM

In my experience (as a CPA, not a tax attorney), the IRS comes on hot & heavy (and self-righteously indignant) about what they would like you to believe are taxes due. If it looks like they’re dealing with a PO’d taxpayer who is willing to fight to the death over a principle (which may establish a precedent contrary to their long-term best interests), they crumble like old, dried-out, government cheese. This is one situation in which I would call their bluff.

RRFCL on July 24, 2012 at 1:27 AM

Extortion and Intimidation. Targets must have registered as Republicans at one point, or perhaps one had a bumper sticker Obama does not like.

pat on July 24, 2012 at 1:28 AM

I looked up a picture of the artwork in question. Apparently I don’t “get” art.

acasilaco on July 24, 2012 at 1:41 AM

possible large republican donators me thinks

losarkos on July 24, 2012 at 2:25 AM

“I looked up a picture of the artwork in question. Apparently I don’t “get” art.” acasilaco

I will gladly join you in that opinion, $65 million for that? send the stupid thing to the IRS and let them deal with it. The eagle looks like a vulture. and all the stuff in the background looks like graffiti
you see in a strip bar’s mens room. Art Really?

stormridercx4 on July 24, 2012 at 2:30 AM

The IRS should rather tax its own stupidity: even the extremely low rate of .0000000001 cents per atom of IRS-stupidity-factor should yield a mighty some to said agency.

Sherman1864 on July 24, 2012 at 5:50 AM

“The Tax is Too Damn High,” anyway.

Sherman1864 on July 24, 2012 at 6:30 AM

The IRS is similar to cancer, slowly consuming that that gives it life.

mixplix on July 24, 2012 at 6:36 AM

I looked up a picture of the artwork in question. Apparently I don’t “get” art.

acasilaco on July 24, 2012 at 1:41 AM

“Art” is never what you think it is because you’re not smart enough to truly appreciate it. You need “experts” to tell you that a crucifix in a jar of urine is a deep life-changing experience. That I can stare at a Renoir painting or Michelangelo sculpture for hours and be so moved by them just tells the world what an uncultured dolt I am. A painting of the Madonna with feces and penises just doesn’t move me like that and I am so much the poorer for it.

SKYFOX on July 24, 2012 at 6:54 AM

Note: Slightly edited second post of something that apparently was flagged.

I looked up a picture of the artwork in question. Apparently I don’t “get” art.

acasilaco on July 24, 2012 at 1:41 AM

“Art” is never what you think it is because you’re not smart enough to truly appreciate it. You need “experts” to tell you that a crucifix in a jar of urine is a deep life-changing experience. That I can stare at a Renoir painting or Michelangelo sculpture for hours and be so moved by them just tells the world what an uncultured dolt I am. A painting of the Madonna with feces and “male appendages” on it just doesn’t move me like that and I am so much the poorer for it.

SKYFOX on July 24, 2012 at 6:59 AM

After dealing with the IRS with a family business after my parents passed away, I’m surprised they stopped at the 65 million mark. Why not value it at a 35 trillion and wipe out the national debt with the tax? Make the heirs borrow the money to pay the tax. Otherwise, it’s jail for you baby!

moo on July 24, 2012 at 7:21 AM

But I thought Obambi said rich people WANT to pay more in taxes?

ctmom on July 24, 2012 at 7:37 AM

Fascism. The only explanation. Communists would simply take it without payment.

rbj on July 24, 2012 at 7:39 AM

Can’t sell it? Now we know why they didn’t just have the mayor Kelo it and donate the proceeds to Obama’s campaign.

Why have I become so cynical as to think that could actually be tomorrow’s headline?

Don L on July 24, 2012 at 8:02 AM

Don’t forget the IRS will have 16,000 new agents to forcefully implement Zerocare and even if it is repealed, these agents will be kept on as govt workers. Wonder what kind of make work assignments they will be given. hmmmm.

Kissmygrits on July 24, 2012 at 8:03 AM

Of course. the IRS is greedy. Take the issue to court. Since the bird can’t be sold because of federal law, it has no value. And, as a footnote the Death Tax reverts to around the 2001 level next year. Estate tax planning is nearly impossible, because of the fickleness of the great United States Congress and its addiction to spend more money than it can possibly take in.

SC.Charlie on July 24, 2012 at 8:16 AM

Some of these works are valued more as cultural artifacts then for intrinsic aesthetic value and Rauschenberg is dead so that will usually increase valuation for an artist of notoriety.

Even if the heirs could sell it, based on the pictures I saw it looks like it’s in pretty bad shape and would require some conservation work or at least the talents of a decent taxidermy restorer.

The Fine Art Market has sucked for a long time, but took a steep dive during the 70′s.

Since the heirs are prevented from selling the work, under current law but are taxed on a supposed valuation then the taxable valuation is bogus.

I hope the heirs win in court cause this is a bogus case for the feds.

If the heirs allowed the work to deteriorate could they be prosecuted by the federal government for what amounts to not preserving a Bald Eagle mummy?

I wonder if owners of American Indian artifacts like Plains Indian Head-dresses which bald eagle feathers have a similar problemo with the IRS or unloading them on the market?

workingclass artist on July 24, 2012 at 8:18 AM

It could accidentally burn in a fire…

so-notbuyingit on July 24, 2012 at 8:30 AM

Or, donate it outside the country.

Or, move outside the US, and take it with them.

Do we ever, need to replace Obama. Everything has gotten worse. Every single thing in our country.

so-notbuyingit on July 24, 2012 at 8:32 AM

federal and estate taxes.

Are utterly immoral creations of class warfare criminals.

If Barker had his way estate taxes would total 400% of the value of the estate. Donors would get an 8000% tax credit. Because that’s how we do math in the modern Democrat party.

CorporatePiggy on July 24, 2012 at 8:35 AM

I looked up a picture of the artwork in question. Apparently I don’t “get” art.

acasilaco on July 24, 2012 at 1:41 AM

“Art” is never what you think it is because you’re not smart enough to truly appreciate it. You need “experts” to tell you that a crucifix in a jar of urine is a deep life-changing experience. That I can stare at a Renoir painting or Michelangelo sculpture for hours and be so moved by them just tells the world what an uncultured dolt I am. A painting of the Madonna with feces and “male appendages” on it just doesn’t move me like that and I am so much the poorer for it.

SKYFOX on July 24, 2012 at 6:59 AM

Agree.

There are a lot of lost artists out there who just make crapola that reflects how lost and confused they are…they reflect their culture.

Duchamp predicted this in 1917 and quit the profession to play chess by the 1920′s.

Art has lost both it’s mission and it’s punch because Artists themselves have lost faith and are left in a insincere post modern vacuum that consists of nothing more than fashionable tribal commentary reduced to babbling while the associated professionals pronounce the valuation for the culture and the buyers.

Art no longer inspires or even challenges anymore. Even the Hot New Markets coming out of the East are more of the same old stuff…post modern babble. It has become a nihilistic mess.

workingclass artist on July 24, 2012 at 8:37 AM

When my father-in-law passed away, my mother-in-law had to sell most of their assets to pay for inheritance tax (decades ago)…it was the most insidious thing I have seen.
They worked their lives to build a portfolio so they could live out their lives. If he would have lived (died at 56), their would have been no tax implications beyond the yearly tax. But because he died, my mother-in-law was punished…barbaric.

right2bright on July 24, 2012 at 8:40 AM

It could accidentally burn in a fire…

so-notbuyingit on July 24, 2012 at 8:30 AM

That would be interesting…since with a $0 valuation by the estate appraisers they can’t even insure it much less sell it can they?

If it was to burn in a fire could the heirs be prosecuted for burning what amounts to rubbish in Granny’s attic?

workingclass artist on July 24, 2012 at 8:42 AM

So everything you have, that you can’t sell, the IRS can put a price tag on it and fine you?
That could put garage sells out of business…

right2bright on July 24, 2012 at 8:42 AM

OMG….. having to pay $600 million in taxes.

I remember the family of Joe Robbie had to sell the Dolphins when he passed away, because they couldn’t survive the tax.

The family of George Steinbrenner didn’t have this problem because George was smart enough to die in 2010, before the tax was re-implemented.

I remember Art Linkletter being on Larry King, saying in a joking way he planned to die in 2010 so the government couldn’t get his money. Then he dies May 26, 2010. Wow.

IMO, bring it to trial. Let the IRS defend its position. I don’t know which way public opinion will go, I just want them to be under the hot lights just once.

itsspideyman on July 24, 2012 at 8:54 AM

Heirs to important art collections are often subject to large tax bills. In this case, the beneficiaries, Nina Sundell and Antonio Homem, have paid $471 million in federal and state estate taxes related to Sonnabend’s roughly $1 billion art collection, which included works by Modern masters from Jasper Johns to Andy Warhol. The children have sold off a large part of it, $600 million worth, to pay the taxes they owed, said their lawyer, Ralph E. Lerner.

Unreal!!

bayview on July 24, 2012 at 8:55 AM

So everything you have, that you can’t sell, the IRS can put a price tag on it and fine you?
That could put garage sells out of business…

right2bright on July 24, 2012 at 8:42 AM

Indeed.

Today the only value Art has is in it’s re-sell value at the auction houses and this is decided by the dealers and the appraisers.

An Artist has no say in it whatsoever and usually doesn’t profit either but will always bear the responsibility of the de-valuation if their work and for whatever reason falls out of favor. This de-valuation happened to Alama-Tadema, who was an historical painter that made beautiful paintings in the mid 19th century when his work was reduced to mere artifactural status by the culture mavens.
It has since made a comeback as to influence and increased in value. http://en.wikipedia.org/wiki/Lawrence_Alma-Tadema

This has happened to 80′s Art Star Julian Schnabel because his plate paintings are badly made and fall apart…and these are as vacuous now as they were when they were made. He makes films now. He’s also a schmuck imho.

workingclass artist on July 24, 2012 at 8:57 AM

includes a stuffed bald eagle, a bird under federal protection,

Why are stuffed birds under federal protection in the first place? I understand protecting the live ones, but the ones that have been dead for years? What purpose does that serve?

AZCoyote on July 24, 2012 at 9:09 AM

Maybe the heirs should have an “accident” in which the bird sculpture is completely destroyed. Then they could claim a $65 million dollar loss, and use it to offset some of the taxes they owe on the other pieces.

AZCoyote on July 24, 2012 at 9:16 AM

canopfor on July 23, 2012 at 10:21 PM

If I understand it correctly, in actuality things aren’t any better in Canada when it comes to inheritance taxes. If “the estate” has to pay the taxes upfront and, say, the “estate” consists of property like a house and land, it will be necessary to sell the “estate” to pay the taxes before the heirs can receive (what’s left of) their inheritance.

Buy Danish on July 24, 2012 at 10:10 AM

If the IRS thinks the sculpture is worth $65 million, let them buy it, take out the $29 million in taxes, and pay the owners $36 million.

Steve Z on July 24, 2012 at 10:31 AM

includes a stuffed bald eagle, a bird under federal protection,

Why are stuffed birds under federal protection in the first place? I understand protecting the live ones, but the ones that have been dead for years? What purpose does that serve?

AZCoyote on July 24, 2012 at 9:09 AM

They could add a burning US flag to the art, and then it would be allowed.

kirkill on July 24, 2012 at 10:32 AM

If I understand it correctly, in actuality things aren’t any better in Canada when it comes to inheritance taxes. If “the estate” has to pay the taxes upfront and, say, the “estate” consists of property like a house and land, it will be necessary to sell the “estate” to pay the taxes before the heirs can receive (what’s left of) their inheritance.

Buy Danish on July 24, 2012 at 10:10 AM

It’s called the death tax. You can’t really inherit your parents’ house–just wish them long life and sell it to the Gubmint when they die, and hope there’s enough left to buy a smaller house.

Steve Z on July 24, 2012 at 10:36 AM

Here’s what our country gets when it elects a president who hates America!

Christian Conservative on July 24, 2012 at 10:54 AM

From what I’ve read it WAS in an art museum, in Washington DC, and now is in a “private collection” in New York, the “Sonnabend Collection”.

To take it, and then say it has a value of zero? I hate the IRS like everybody, but these are billionaire tax-cheats.

Marcus on July 23, 2012 at 10:12 PM

Not necessarily.

Many things on display in museums are on loan from private collections and are not owned by the museum. This is usually credited on the display card at the museum and in museum archives if the piece is in storage or traveling for exhibition (Part of the loan may be the Museum picks up the tab for insurance and proper care of the piece while it is in their possession)

Some of these loans are perpetuated for years until either the museum buys it or replaces it when the owners retrieve it. It’s an old practice that can benefit both the institution and the owner.

workingclass artist on July 24, 2012 at 11:16 AM

AZCoyote on July 24, 2012 at 9:09 AM

Two reasons, Coyote. First, it is designed to reduce the temptation to kill a protected bird, then claim it was stuffed a long time ago, and, therefore, ok to sell. Second, it has to do with Native American artifacts and traditions. (They are the only ones who can even possess a bald eagle feather, for crying out loud, even if you find it laying on the ground.)

GWB on July 24, 2012 at 11:22 AM

Put it on public outdoor display in the Detroit ‘hood. After 24 hours a 29 M$ tax write off would be in order.

Annar on July 24, 2012 at 11:47 AM

The death tax is wrong and immoral on every level.

The government didn’t create that estate. And the family collected the art work to pass on to their heirs.

But what happens is the the estate is often tied up in infrastructure like a large farm, restaurant, etc. And so the survivors have to sell the family farm or business in order to pay the death tax demanded by the government.

It’s immoral. The taxes on everybit of the money used to buy the art has already been paid in full. The taxes on the money used to buy the farm and business has been paid.

But when you die, the government says that it as the right to the money on which all taxes have already been paid.

We must vote the progressive liberals out of office and restore the federal government to its constitutional roots. Our founding fathers never invisioned the government seizing private property on which taxes and other liens have been paid.

It’s wrong on every imagineable level. Why is our government at war with its citizens??????

BMF on July 24, 2012 at 12:18 PM

This is the same gov’t that is demanding that a certain fuel be used or fines could be faced, with the small detail that the fuel in question does not yet exist. At least they have taken the high road by demanding that only a very small amount of this non-existent fuel be used.

If examples such as these do not convince the populace of the dangers of a large, irresponsive government, then we’ll get what we deserve. [sigh]

NeoCon_1 on July 24, 2012 at 1:30 PM

The inheritance tax is meant to break up large estates so that we do not have multi-generational ‘families’.
Being a Progressive Idea, it of course generates the exact opposite outcome.
You end up with the truly rich putting their money into foundations and trusts, that by law must invest in very safe financial devices. Thus you end up with 5-6 generations living off of the wealth creator’s estate instead of having William III blow the money on ill advised business plans.

Nathan_OH on July 24, 2012 at 1:43 PM

IRS = Illegal Repulsive SCUM

Brushjumper on July 24, 2012 at 1:47 PM

We are taxed too heavily, and our idea of taxation has lost its moorings.

You don’t owe the government anything merely because you woke up one day and were in America. Taxation is something that funds the operations of government, period. It isn’t about fairness or contribution to society. It ought to be kept as minimal as possible.

I used to give lip service to the importance of making sure people were paying the right amount of taxes according to law. I don’t any more. I’ll continue to be as honest as possible, because God is my judge and He knows everything I do. But I seriously do not care whether other people, including “the rich,” are being soaked to the maximum extent possible.

I just don’t care. Government spending has zero relation today to either the amount of tax receipts or the legitimate obligations of government to provide services for the people. If we’re going to focus on something, as an electorate, it needs to be that. I seriously and honestly do not care about rich people who have paid less in taxes than the sanctimonious want them to. Operating the IRS on that premise is a recipe for disaster for the middle class, which can’t protect itself. Fix the problem of our smelly, disgusting fiscal incontinence; fix crony-tending as a government spending activity; fix the creation of a permanently dependent underclass with our tax dollars; get rid of all the government agencies that function as wholly-owned vehicles for special interests — fix all of that, and a dozen other major things I haven’t mentioned yet, and then it will be time to “go after” people’s inheritances and loopholes. In the meantime, it’s not “lawful” to sic the IRS on people, it’s vicious, jackbooted thuggery.

J.E. Dyer on July 24, 2012 at 3:21 PM

It is a bit depressing that this craziness started on W’s watch.

Cindy Munford on December 3, 2012 at 3:15 PM

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