The illegal eagle and a badly grasping IRS

The arrival of “Canyon” at MoMA is the culmination of a five-year absurdist farce—one tinged more by Kafka than Feydeau—that involved the IRS, the U.S. Fish and Wildlife Service and the heirs of art dealer Ileana Sonnabend. It might have been laughable, except that the stakes were so high. …

The presence of the stuffed eagle meant it couldn’t be sold without violating the 1940 Bald and Golden Eagle Protection Act and the 1918 Migratory Bird Treaty Act. Since the artwork couldn’t be sold, logic dictated that it be listed as having zero value, which is what the Sonnabend family’s three appraisers, one of them Christie’s auction house, did.

But don’t look for “logic” in any government dictionary. In the summer of 2011, the IRS sent the family an unsigned report appraising “Canyon” at $15 million. When they rejected the valuation, the government upped the ante: The appraisal was increased to $65 million, which yielded a $29.2 million tax bill. And the IRS levied a special “undervaluation penalty” of 40%, applied in cases where a party has made what the IRS deems a “gross understatement” of a property’s value. That added $11.2 million to the tab. Plus interest.