When it comes to the IRS and taxes, the message is more often than not that you really can't have your cake and eat it too. Unfortunately, this also means that heirs oftentimes end up between a rock and a hard place. For an extreme lesson, consider the case of Ileana Sonnabend.
What do you do when something is both so valuable as to trigger taxation and yet also so valuable – and illegal – that it is without value on the market? Some readers might have run across this story last month, but it gets coverage over in this recent article in Forbes.
Sonnabend was a bit of an art buff, to put it lightly, and her collection of modern art requires a doctorate in modern art history to fully articulate, with such names as Jeff Koons, Roy Lichtenstein, Andy Warhol and Cy Twombly rounding out the gallery walls. At her death, all of these works passed to her heirs and, to pay for the estate taxes thusly triggered, her heirs had to sell those very pieces.
It's a sad story, if you just stop there. However, then you miss the most unique of artwork (and, at the very mention of "most unique," it's worth noting that some of these artists considered toothpaste a means of expression), a piece known as "canyon" by Robert Rauschenberg.
"Canyon" is really a mixed media piece incorporating a stuffed bald eagle, putting the production and sale of same on the darker side of the law as far as the Bald Eagle Act of 1940 is concerned. Accordingly, "Canyon" is not only art, but it's illegal art. Nevertheless, it squeaks by on a technicality: it predates the Bald Eagle Act.
As such it is beyond value, literally, because it is restricted from the market. But that doesn't put it beyond the interest and reach of the IRS. Apparently, the IRS incorporated the piece as part of the taxable estate, even though it was beyond selling by U.S. law, it could still be sold internationally (and on black markets.)
That's a strange place for a strange piece of art, to be sure, but it does highlight the fact that art, as both real property and expensive property, requires more than a little planning. Sonnabend herself didn't take advantage of any estate planning, forcing her heirs to sell the very art for which the estate tax was assessed.
Again, to learn more about (and understand) the art you'll need a doctorate degree, but to learn more about Sonnabend and her legacy you should consult the original article. On a more personal note, to make proper estate planning arrangements for your own art and the rest of your estate engage competent counsel to help you take advantage of available techniques that can save your own unique collection and the family you hope to inherit it.
At Idaho Estate Planning we have a network of resources to help you care for yourself and/or your loved ones. Let's work together and initiate a plan that works for your individual circumstances. Remember, good planning is no accident.