The appraisers of fine art who are most acceptable to insurance companies and the IRS carry credentials that they have earned through prescribed academic study, experience and apprenticeship, during which many of their appraisals have been peer-evaluated and examined. Upon completing this process they are awarded certification and membership in a professional association such as the Appraisers Association of America, the International Society of Appraisers or the American Society of Appraisers.
These standards were developed by the Appraisal Foundation, in Washington, D.
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It was founded in and was named by Congress in as the source for appraisal standards and appraiser qualifications in the aftermath of the savings and loan crisis. USPAP compliance is now required by all of the major fine arts appraisal associations, with a compulsory hour course of study as well as required examinations with recertification every five years. Most appraisal professionals set their fees on an hourly or per-diem basis. In most cases, the appraiser is able to give the client a broad idea of the time needed to complete the job.
Professional appraisers may choose other methods of billing, such as on a per-object basis, but all professional associations prohibit their members from billing based on a percentage of the eventual appraised value of the piece or collection. Percentage billing is also prohibited by the IRS Treas.
Valuing Art for Tax Purposes
The professional art and artifact appraiser must produce a complete analysis of artwork for tax purposes to establish its value and thus minimize the potential of an IRS challenge. The volatility and unpredictable nature of the art market, with its ever-changing tastes and styles, as well as price and value corrections, can make agreeing on a valuation challenging. However, understanding the appraisal process allows both the taxpayer who owns art and his or her CPA tax adviser the opportunity to make the most informed decision.
In , the most recent year for which a report is available tinyurl. The panel recommended acceptance of Another 2. The panel reported aggregate results of its reviews for estate and gift cases separately from charitable deduction cases:. Estate and Gift Cases. Of these, it concluded reviews of items percentages are of total estate and gift items :. Reviews Concluded. Charitable Contributions.
Of these, it concluded reviews of items percentages are of total charitable contribution items :. Artworks are often donated for a charitable deduction for income tax purposes or valued as a gift or part of a taxable estate. CPAs need to make sure that clients have obtained a qualified appraisal of a fair market value that can be successfully defended in a return examination. Also, the IRS has challenged blockage discounts applied by taxpayers to collections of artworks. As with other tax-related valuations of personal property, a qualified appraisal prepared by a qualified appraiser is essential.
Credentials for fine art appraising usually include membership in a professional association and adherence to the substance and principles of the Uniform Standards of Professional Appraisal Practice. Alan Breus alanb thebreusgroup.
What is Art Valuation?
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What Determines the Value of Art? - The Artists' Fine Art Gallery
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A counterintuitive strategy can save taxes by including otherwise excludable scholarships in gross income. Toggle search Toggle navigation. Breaking News. Valuing Art for Tax Purposes Beauty may be in the eye of the beholder, but art valuation requires reason and objectivity. THE APPRAISER For appraisals that result in a substantial tax valuation misstatement, substantial estate or gift tax undervaluation within the meaning of section g or gross valuation misstatement within the meaning of section h , the appraiser can be liable for a penalty.
Latest News. Most Read. FEATURE Maximizing the higher education tax credits A counterintuitive strategy can save taxes by including otherwise excludable scholarships in gross income.
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