New rules and enforcement guidelines may render these items not only illegal to export or import, but also unsalable within the United States.
By Stephen K Lehnardt
Valuing artwork is never easy. It gets much more difficult when antiques contain protected materials which cannot be legally sold, particularly ivory. So, how do you value a priceless…yet worthless object? While this issue is not new, following are some recent serious turns:
Priceless, yet worthless was the issue in the Sonnabend case argued in the U.S. Tax Court in 2012. In brief, the Sonnabend estate claimed a $0.00 valuation for Raushenberg’s “Canyon”, a mixed media artwork that includes the remains of a bald eagle. Because various U.S. laws protect bald eagles, including the sale or possession of their remains, the estate claimed that Canyon could not have any “fair market value” since it could not be sold under U.S. law.
The IRS, however, put forth an odd analysis involving the possibility of illegal or foreign markets offering a price for fair market analysis. The result: regulations forbidding the sale of items within an antique or piece of art do not prevent tax based on “fair market value.” Rather than requiring the estate to pay assessed tax and penalties, the IRS and estate settled by agreeing that Canyon would be donated to the Museum of Modern Art in New York in exchange for dropping the tax claim.
Now to ivory. Elephant ivory has long been an issue in valuation for estates and taxation purposes. There have been certain workarounds and a notable exemption in the case of antiques. Nevertheless, with the issuance of an amended “Director’s Order 210” by the Fish and Wildlife Service on May 15, 2014, it looks like the exemption has seen its last days. The FWS posted comments on the order “Questions and Answers about Director’s Order 210” which state in part:
Under a special rule that has not yet been revoked, items made from African elephant ivory can still be sold across State lines and exported whether they qualify for the ESA [Endangered Species Act] antiques exception or not. We are working on the regulatory action needed to change this regulation.
New regulations have not yet been published; therefore it is hard to say what the legal circumstances facing estates and family heirlooms may be. On the other hand, it is clear that it will become all the more difficult. According to several sources, the market for ivory antiques has already frozen in indecision. One helpful guide you may wish to review is contained in a recent WealthManagement article titled “Zero Fair Market Value for Antiques?”
Do you and your family own special antiques and how do you plan for them? Specific plans must be made for items containing ivory and other substances. In the end, it might simply be illegal and/or impossible to pass some of these items to the next generation. Don’t wait to start the process until new regulations are released. Now is the time to devise a strategy to keep those precious family heirlooms or ensure the highest value for your unique antique collection.
For more information in Liberty, MO and the Kansas City Area about effective planning and to access free information and tools to organize your estate, visit our elder law and estate planning website.
Reference: WealthManagement (June 19, 2014) “Zero Fair Market Value for Antiques?”