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[RDreamer]

The people decrying estate tax in general in here are crazy. This is just a really weird intersection of law and tax code that's pretty unique, and the courts should be able to handle it decently enough. I'll get up in arms if the court system fails.

Personally I'd say they owe something on it, though I wouldn't say nearly the 65 million the IRS is valuing it at. Even if they can't sell it, the piece is worth something, and the original guy did pay something for it. So technically they're inheriting something of worth. I'd personally say it should cost them to keep it just a bit lower than they would have got back (or credited) from donating it to a museum.

Also, couldn't they disclaim this particular piece?

I call it the "bootstrap tax", if you haven't earned enough in your life to inherit your family's estate then you just haven't worked hard enough, and someone who has worked harder than you will get to buy your estate.

lol, I love this.

 

[Sho_Nuff82]

Wait a sec...

How can the IRS tax property left to someone else in a will? That's absurd. I assume taxes would have to be paid if ever the pieces were sold to someone else, but in this case, no money is changing hands.

 

[poppabk]

You can't write the value off of something that's worth $0, as explained in the NYT article. So they can donate it to a public institution, but would still have to pay the tax on it.

I don't feel particularly sad for these people, but bullshit is bullshit, and what the IRS is doing is bullshit. It's almost like they want them to sell it illegally

If the IRS values it at $x for the purposes of inheritance, why would the IRS value it at $0 for purposes of donation?

 

[alphaNoid]

I'm all in favor of abolishing the estate tax. What a joke. The IRS is relentless.

THIS

 

[pigeon]

I would say that a very relevant fact is that it is against the law to sell the piece, which is why Christie's valued it at zero. Now, we know that the decedent obtained a waiver to possess the piece, but can the heirs obtain a similar waiver to allow them to sell it? If they cannot obtain this waiver, then I think the IRS's assessment of its value is on shakey ground. If, however, they could obtain the waiver but simply do not want to part with the artwork, then I think the IRS stands a strong chance of prevailing on the issue.

Again, according to the Forbes piece, the IRS has previously pressed successful claims against people based on black market valuations of goods that are currently illegal to sell, so case law is on their side. Doesn't mean that they should necessarily pay the full amount on this piece, but it's not crazy for them to assess for it if it's in line with settled law.

 

[Oppo]

If you are using the term "death tax" then you have already bought into a negative frame.

 

[mre]

Personally I'd say they owe something on it, though I wouldn't say nearly the 65 million the IRS is valuing it at. Even if they can't sell it, the piece is worth something, and the original guy did pay something for it. So technically they're inheriting something of worth. I'd personally say it should cost them to keep it just a bit lower than they would have got back (or credited) from donating it to a museum.

If they are legally prohibited from selling the piece, then, by the IRS's own regulations, there is a very, very strong argument that the piece's fair market value--upon which its value for purposes of the estate tax--is zero.

Again, according to the Forbes piece, the IRS has previously pressed successful claims against people based on black market valuations of goods that are currently illegal to sell, so case law is on their side. Doesn't mean that they should necessarily pay the full amount on this piece, but it's not crazy for them to assess for it if it's in line with settled law.

I read the Forbes article that you posted. The author even pointed out that the facts covered by the letter ruling do not square with the facts in the present case.

Furthermore, a point that the IRS found dispositive in the private letter ruling mentioned by the Forbes article, was the ease with which the decedent had been able to sell his illicitly obtained collection:

From the income information provided by the Decedent to the Internal Revenue Service over the years, it does not appear that the Decedent had any job or profession that would enable him to acquire a vast orchid collection, travel so extensively, or live so lavishly. It is a compelling inference that the Decedent successfully sold a substantial quantity of stolen art objects to finance his lifestyle.

Thus, not only did the Decedent have the full use, possession, and enjoyment of the stolen art property, but also he had the apparent ability to easily sell that property if, as, and when he felt he needed money. As such, he was the substantive owner of the beneficial interest in that property at his death.

The Forbes article also mentioned how there is no ready market, legal or otherwise, for this particular piece of art.

 

[Lonely1]

Here I was thinking that a 'poor' relative had been awarded the this tiger.

 

[twobear]

Nobody is claiming as such. But I think you set a dangerous precedent if that is your standard of tolerance when it comes to the government taking money from you.

You mean, your level of tolerance in giving taxes that you owe.

 

[Guevara]

If they truly thought the piece was worthless they'd disclaim it. Because they believe it has or will have value, they will pay the tax. This is totally a non-issue.

 

[Jeff-DSA]

If they are legally prohibited from selling the piece, then, by the IRS's own regulations, there is a very, very strong argument that the piece's fair market value--upon which its value for purposes of the estate tax--is zero.

Exactly.

Also, it's total BS that they have to pay tax for the value of the art. What if I was dirt poor and one of my relatives (who has some original Diego Rivera art) left me some art from their personal collection? I can't pay the taxes, but I'd be a villain in the family if I sold off what is essentially a family heirloom at this point. If they feel that they need to tax that stuff, it should only be taxed at the time it is sold. This is stuff that has already been taxed before, so it's wrong to tax it simply because it changes hands within a family.

 

[RDreamer]

What exactly does one do with a billion dollar art collection anyway? Do people pay to go see it like a museum, or does some weird rich dude just hoard it in his mansion?

 

[Partial Gamification]

What exactly does one do with a billion dollar art collection anyway? Do people pay to go see it like a museum, or does some weird rich dude just hoard it in his mansion?

pace back and forth muttering, mine.. mine.. all mine...

 

[Stinkles]

Yay death taxes!

http://www.foxnews.com/us/2012/07/24/irs-art-collection-heirs-hope-to-settle-bizarre-tax-dispute-over-canyon-collage/

Thank god Kosmo is here to champion the little guy and use more accurate semantics than "estate tax."

 

[twobear]

What exactly does one do with a billion dollar art collection anyway? Do people pay to go see it like a museum, or does some weird rich dude just hoard it in his mansion?

The latter.

 

[The Technomancer]

What exactly does one do with a billion dollar art collection anyway? Do people pay to go see it like a museum, or does some weird rich dude just hoard it in his mansion?

"Art isn't easy/trying to make connections/who understands it/difficult to evaluate
Art isn't easy/trying to form collections/always in transit/and then when you have to collaborate"

 

[Cat Party]

If they win their case against the IRS and subsequently sell the piece, then they would presumably be doing so with a basis of $0, and would therefore be taxed on any income they received. The rub here, is that the amount of tax assessed in this situation would be significantly less than what is owed under the estate tax.

What's interesting, is that the IRS seems to be ignoring its own regulations when assessing this piece at such a high value. IRS regs state that:

The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent's gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate.​

26 C.F.R. § 20.2031–1(b)

I would say that a very relevant fact is that it is against the law to sell the piece, which is why Christie's valued it at zero. Now, we know that the decedent obtained a waiver to possess the piece, but can the heirs obtain a similar waiver to allow them to sell it? If they cannot obtain this waiver, then I think the IRS's assessment of its value is on shakey ground. If, however, they could obtain the waiver but simply do not want to part with the artwork, then I think the IRS stands a strong chance of prevailing on the issue.

That definition does not actually exclude a valuation based on the black market price. And is FMV the exclusive method of valuation?

But I think we can agree that if this case makes it to the appeals courts, it will be in every tax law text book made going forward. Such an interesting topic. It is certainly an odd situation to have something that can be possessed but not sold. That's why I'm really curious about whether it is possible these people can get a waiver at some point. If it is possible, then it cannot be said to be valueless, IMO.

 

[shadowsdarknes]

That definition does not actually exclude a valuation based on the black market price. And is FMV the exclusive method of valuation?

But I think we can agree that if this case makes it to the appeals courts, it will be in every tax law text book made going forward. Such an interesting topic. It is certainly an odd situation to have something that can be possessed but not sold. That's why I'm really curious about whether it is possible these people can get a waiver at some point. If it is possible, then it cannot be said to be valueless, IMO.

They can legally possess the artwork. It is illegal to sell the piece. The IRS is assuming they will sell the piece illegally through the black market as a basis for their valuation. In America, men are always innocent until proven guilty. It seems the IRS is bending their rules and an American principle to unfairly collect a significant sum of money. That action is unjust.

 

[Dead Man]

Exactly.

Also, it's total BS that they have to pay tax for the value of the art. What if I was dirt poor and one of my relatives (who has some original Diego Rivera art) left me some art from their personal collection? I can't pay the taxes, but I'd be a villain in the family if I sold off what is essentially a family heirloom at this point. If they feel that they need to tax that stuff, it should only be taxed at the time it is sold. This is stuff that has already been taxed before, so it's wrong to tax it simply because it changes hands within a family.

Is it worth more than $5 million? If not, you probably don't have to worry.

 

[Jeff-DSA]

Is it worth more than $5 million? If not, you probably don't have to worry.

It's a hypothetical, really. I don't know exactly how much they have or what it's all worth, but I think it's significant. They own more than just Diego Rivera stuff, but that's the part of the collection that they love most.

 

[CurlySaysX]

Donate it to the local art gallery claim the donation on tax. Win Win.

 

[Dead Man]

It's a hypothetical, really. I don't know exactly how much they have or what it's all worth, but I think it's significant. They own more than just Diego Rivera stuff, but that's the part of the collection that they love most.

My point is that estate taxes in the US start when the estate is over $5million (someone please correct me if I'm wrong), so unless that person has a serious collection, or a Da Vinci stashed in there, you should not have to worry.

 

[ides of march]

If it can't be sold, how can it be valued at $65 mil?

I'd destroy the piece and ask for a re-valuation.

Was thinking this if I can't sell it isn't it worthless. In fact if its illegal to posses a stuffed eagle how can they even take possession of it?

 

[ronito]

Saw the words "death tax" and I knew it was Kosmo.

Honestly the rich have done such a good job on framing this argument in their favor.

"It's a death tax!"
"You mean that the dead are paying the taxes?"
"Well no, not them but their inheritors are paying taxes!"
"Well isn't that like a financial/estate transaction?"
"Yeah"
"Can you think of any financial/estate transaction that ISN'T taxed?"
"But the dead already paid taxes!"
"Yeah, and I already paid taxes on my car and if I sell it/give it to someone they have to pay taxes on it. Why is it any different just because I'm dead?"
"Uhh....death tax!!"

 

[mre]

That definition does not actually exclude a valuation based on the black market price.

No, it does not, which is a good point that Pigeon brought up and was discussed in the Forbes article. I think this case is factually different from the precedent case law, in that we're dealing with something, as you mention below, that is legal to possess, but illegal to sell. Drugs, stolen artwork, etc., are all contraband items, the possession of which is illegal in and of itself. The black market is the only market available for the transfer of those products. This is a piece of art, legally obtained, the disposition of which is constrained by law.

And is FMV the exclusive method of valuation?

Yes is. For personal products of high value, the FMV may be determined through the appraisal of an expert. See 26 C.F.R. § 20.2031–1 and 26 C.F.R. § 20.2031–6 (which deals specifically with issues of valuation relating to personal property).

But I think we can agree that if this case makes it to the appeals courts, it will be in every tax law text book made going forward. Such an interesting topic. It is certainly an odd situation to have something that can be possessed but not sold. That's why I'm really curious about whether it is possible these people can get a waiver at some point. If it is possible, then it cannot be said to be valueless, IMO.

Agree completely.

 

[Partial Gamification]

My point is that estate taxes in the US start when the estate is over $5million (someone please correct me if I'm wrong), so unless that person has a serious collection, or a Da Vinci stashed in there, you should not have to worry.

You are correct:
Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return. A filing is required for estates with combined gross assets and prior taxable gifts exceeding $1,500,000 in 2004 - 2005; $2,000,000 in 2006 - 2008; $3,500,000 for decedents dying in 2009; and $5,000,000 or more for decedent's dying in 2010 or later (note: there are special rules for decedents dying in 2010.)

 

[Jarmel]

Unless you're a millionaire (and a millionaire ass millionaire, not some pussy shit), you are not going to owe an estate tax.

I don't think that's true. My parents have mentioned I'm going to get hit with the estate tax in regards to our house. I might be misrepresenting what they said but I have to cough up 50% of the house.

It might have heard them wrong though.

 

[mre]

I don't think that's true. My parents have mentioned I'm going to get hit with the estate tax in regards to our house. I might be misrepresenting what they said but I have to cough up 50% of the house.

How much is the house worth?

 

[Kosmo]

That definition does not actually exclude a valuation based on the black market price.

I think it actually does:

Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public

I do not think the the market in which art is most commonly sold to the public is the black market.

 

[RDreamer]

I don't think that's true. My parents have mentioned I'm going to get hit with the estate tax in regards to our house. I might be misrepresenting what they said but I have to cough up 50% of the house.

It might have heard them wrong though.

When did they say this? Because as the post above points out, that threshold has moved from 1.5 million in 2004 to 5 million now.

And if their house is worth more than 5 million, then yeah... they're multi-millionaires.

I do not think the the market in which art is most commonly sold to the public is the black market.

The market in which an illegal to sell piece of art would be commonly sold to the public would most definitely be the black market, lol.

Note: I'm not defending that definition at all... just kind of sarcastically joking.

 

[Jarmel]

How much is the house worth?

We bought it for 2 mil in 04/05 but then we heavily modified both the poolhouse and greenhouse so probably 2.5 I guess. Don't know how much the market crashing has impacted the price though.

 

[Dorrin]

Ever notice how people complaining about taxes never understand anything about them?

It boggles my mind that the same money can be taxed multiple times. I made the money, and I paid income tax on it. Then I die, and my son gets the money. Oh, he has to pay income tax on it again!

Fucking ridiculous.

You must have a large estate then right? Is it over 5 million because that is the limit in 2012.

That is not even what I'm talking about. You cannot give another individual in the United States more than $13,000 a year tax free.

If I wanted to say, give my brother $50,000 this year, to help him buy a house, I would have to pay taxes on that money, again.

You wouldn't have to pay the taxes.. your brother would and not on the whole 50k it would only be on 37k and only if you are both single. Infact if you are married and your brother is married then you and your spouse can give up to 13k each to him and his wife, you could move the whole 50k tax free.

The IRS is a joke.

If I give lunarworks $10,000 legally he/she is supossed to give the the IRS, who played no part in that transaction, a cut.

Yet the country is constantly in debt.

Lunaworks would owe nothing you can gift up to 13k a year tax free from one individual to another. Don't complain about our country or the irs when a simple search could have told you that your example was garbage.

 

[Kosmo]

Saw the words "death tax" and I knew it was Kosmo.

Honestly the rich have done such a good job on framing this argument in their favor.

"It's a death tax!"
"You mean that the dead are paying the taxes?"
"Well no, not them but their inheritors are paying taxes!"
"Well isn't that like a financial/estate transaction?"
"Yeah"
"Can you think of any financial/estate transaction that ISN'T taxed?"
"But the dead already paid taxes!"
"Yeah, and I already paid taxes on my car and if I sell it/give it to someone they have to pay taxes on it. Why is it any different just because I'm dead?"
"Uhh....death tax!!"

Is the tax instituted before someone dies? It is no different than the framing that goes on in all manner of political debate (abortion = "killing babies"; people paying their "fair share" and on and on).

 

[Tapiozona]

I don't think that's true. My parents have mentioned I'm going to get hit with the estate tax in regards to our house. I might be misrepresenting what they said but I have to cough up 50% of the house.

Depends when they die. Estate taxes fluctuate every single year but unless the house is valued over $1,000,000, you're fine. Even then you're only taxed for any amount over that. Who knows what the cutoff will be when they pass away. In 2011 it was $5,000,000, in 2012 it was 5.12 million.

Odds are they'll pass a new law moving that number back into the multiple millions again so you're fine. Every law maker has something to gain by increasing the exemption.

 

[Zilch]

What exactly does one do with a billion dollar art collection anyway? Do people pay to go see it like a museum, or does some weird rich dude just hoard it in his mansion?

Stash it in a european freeport!

 

[ronito]

Is the tax instituted before someone dies? It is no different than the framing that goes on in all manner of political debate (abortion = "killing babies"; people paying their "fair share" and on and on).

Just because one of the parties is dead doesn't allow you to call it a "death tax" they're not the ones paying.
You're right it is one of those "killing babies"/"where much is given much is required" things.
It frames the argument on your side from the beginning.

 

[Jarmel]

Depends when they die. Estate taxes fluctuate every single year but unless the house is valued over $1,000,000, you're fine. Even then you're only taxed for any amount over that. Who knows what the cutoff will be when they pass away. In 2011 it was $5,000,000, in 2012 it was 5.12 million.

Odds are they'll pass a new law moving that number back into the multiple millions again so you're fine.

Also when we talk estate, are we talking about everything they own or just the house?

 

[mre]

We bought it for 2 mil in 04/05 but then we heavily modified both the poolhouse and greenhouse so probably 2.5 I guess. Don't know how much the market crashing has impacted the price though.

Unless either (1) your parents die this year or (2) Congress amends the current estate tax law, then they are probably right. If Congress takes no additional action, then in 2013 the exemption will revert to $1m (per spouse), with the highest level of taxes hitting any estate with more than $3m in assets (after the exemptions).

Edit: Estate = all assets of the deceased

 

[RDreamer]

Also when we talk estate, are we talking about everything they own or just the house?

Everything that passes to you.

 

[Tapiozona]

Also when we talk estate, are we talking about everything they own or just the house?

Value of all combined assets minus debts.

 

[Jarmel]

Unless either (1) your parents die this year or (2) Congress amends the current estate tax law, then they are probably right. If Congress takes no additional action, then in 2013 the exemption will revert to $1m (per spouse), with the highest level of taxes hitting any estate with more than $3m in assets (after the exemptions).

Edit: Estate = all assets of the deceased

So I'm almost certainly fucked. Well it's nice knowing that upfront.

 

[pigeon]

I read the Forbes article that you posted. The author even pointed out that the facts covered by the letter ruling do not square with the facts in the present case.

But they also quote a lawyer saying that case law supports the IRS here.

Again, I'm not saying that they should necessarily be paying $30 million -- honestly, I don't think we know enough to make the determination of how much is the "right" amount for them to pay, that's why we have the courts. But I think it's the fiduciary responsibility of the IRS to assess for as much as they can legally justify, especially if we accept the right of multimillionaires to self-assess for as little as they can legally justify. These people are not going to lose their houses over this.

 

[Angry Fork]

I'm not sure what the big deal is about 'death taxes'. It seems like a good thing, if anything inheritance should be gotten rid of or at least curtailed in some form. If people on the right want to talk about personal responsibility and bootstraps surely they would agree a man should work for what he wants/earns?

 

[twobear]

Is the tax instituted before someone dies? It is no different than the framing that goes on in all manner of political debate (abortion = "killing babies"; people paying their "fair share" and on and on).

In other words, 'tu quoque'?

 

[Zaraki_Kenpachi]

Ever notice how people complaining about taxes never understand anything about them?



You must have a large estate then right? Is it over 5 million because that is the limit in 2012.



You wouldn't have to pay the taxes.. your brother would and not on the whole 50k it would only be on 37k and only if you are both single. Infact if you are married and your brother is married then you and your spouse can give up to 13k each to him and his wife, you could move the whole 50k tax free.



Lunaworks would owe nothing you can gift up to 13k a year tax free from one individual to another. Don't complain about our country or the irs when a simple search could have told you that your example was garbage.

I take it you haven't seen Dark Octave post much. His example is worthless anyhow since even if it did work like he said, what does that have to do with debt held by a country?

 

[Kosmo]

Just because one of the parties is dead doesn't allow you to call it a "death tax" they're not the ones paying.
You're right it is one of those "killing babies"/"where much is given much is required" things.
It frames the argument on your side from the beginning.

Whatever floats your boat to let you rationalize it in your mind.

Let's say my parents are getting older, own a house that would qualify for the estate tax, and I'm living with them to help them out. The house is paid for, there's enough money in the bank to live on (not exhorbitant, just enough to pay the property taxes, food, utilities, etc). My parent die, and I inherit the house, only now I am hit with a tax bill that is much more than I have in the bank, so now, instead of just remaining in the house, I have to figure out a way to sell it, give half of that to the government, and find a new house to live in.

Why does that make sense in your mind, other than supporting confiscatory tax policies?

 

[Arrowgigantic]

The estate tax is very important in terms of economic stability. If wealth is allowed to continue to accumulate without limit at the top end, that causes bad things to happen macroeconomically. Say it's not fair all you want, it's a lot more fair than economic collapse.

 

[SquiddyCracker]

Good on the IRS.
It's disruptive to society as a whole to have big chunks of money transfer for one generation of individuals to another within a particular part of society.

I'd even go so far and say that a dead man have no rights to anything they've previously owned, and that any inheritance should be limited and nothing more than a courtesy to the surviving kin. This wouldn't affect 99% of people out there, but ensure that people really only gain wealth through their own hard-work rather than the luck of being born to the right parents.

 

[Guevara]

So I'm almost certainly fucked. Well it's nice knowing that upfront.

Inheriting millions of dollars and owing less than half in taxes is "fucked" now? Interesting.

 

[balladofwindfishes]

Why does that make sense in your mind, other than supporting confiscatory tax policies?

because it's still an exchange of wealth between two parties.

And your scenario doesn't happen as often as you'd like to believe it does