The Estate of Eva Franzen Kohlman included two Old Master paintings, Village Kermesse with Dance Around the Maypole (“Maypole”) and Orpheus Charming the Animals. Both were filthy on the day of death. The Estate’s expert appraiser, George Wachter, claimed that the dirt significantly devalued the paintings. The Tax Court accepted the opinion of the IRS’s expert that a simple cleaning would reveal the real value, resulting in a $585,836 tax deficiency against the Estate.

The Ninth Circuit Court of Appeals affirmed the Tax Court’s use of the usual valuation approach of determining how much a willing buyer would pay a willing seller on the date of death. In particular, the appellate court determined that the Tax Court did not err in its conclusion that cleaning the property before the sale was an advised, low-risk undertaking. It noted that Wachter did not provide data on comparable sales or explain why the sale price for Maypole was five times his appraised value.

Art appraisals have a reputation for being highly unreliable. A good estate lawyer can help you assemble a team of reputable estate professionals to keep you out of trouble.  Estate of Eva Franzen Kollsman v Commissioner, No.19-70565 (9th Cir. 2019)

About the Author:
John O’Grady leads a full-service estate and trust law firm in San Francisco. His practice includes Estate Planning & Administration, Probate and Trust Litigation.