There was a very odd estate tax dispute settled recently. It involved a treasured work of art, and the question was whether or not it has any taxable value.
If you were to leave behind a valuable piece of art it would be considered to be a taxable part of your estate. If the individual inheriting the piece could not afford to pay the estate tax out-of-pocket he or she could sell the work and pay the tax with some of the proceeds.
This was not the case with a sculptural combine created by Robert Rauschenberg entitled “Canyon.”
This piece was inherited by the children of the noted art dealer Ileana Sonnabend. The Internal Revenue Service placed a $65 million taxable value on the sculptural combine.
Since the heirs to the estate did not pay taxes on this particular work (though they did pay $471 million in estate taxes on the collection that they inherited) the IRS demanded over $29 million in taxes and around $11 million in penalties.
The reason why the heirs to the estate did not pay taxes on this work is because of the fact that it can never be sold. A bald eagle that has been stuffed is at the center of the work, and the species is protected and you cannot sell such a bird in any form.
It would seem as though Sonnabend’s children had a good point, and ultimately the Internal Revenue Service relented.
This sculptural combine is now part of the collection of the New York Museum of Modern Art. It was donated to the museum by the heirs to the estate, and in return the IRS has ceased collection attempts.
- Beneficiary Designations and Other Non-Probate Transfers - February 24, 2020
- Estate Planning Conference DiscussesSECURE Act and More - February 17, 2020
- The SECURE Act and What It Means for You - February 10, 2020