Tax Court Settles Art Valuation Case—Accounting Today

Estate of Elkins Included Works by Picasso, Jackson Pollock, Henry Moore, Paul Cezanne, and Jasper Johns

Roger Russell at Accounting Today reports that in the case, Estate of Elkins, 140 TC No. 5, the court applied Section 2703(a)(2) of the Tax Code in valuing the art, which included works by Picasso, Jackson Pollock, Henry Moore, Paul Cezanne, and Jasper Johns.  Section 2703(a)(2) of the Tax Code provides that the value of any property should be determined without regard to any restriction on the right to sell or use the property.  The IRS Commissioner claimed an estate tax deficiency in excess of $9 million.  Here’s more:

“The deceased, James Elkins, Jr., and his wife accumulated the art during their marriage.  They created a grantor retained income trust (GRIT) with each party’s interest in three of the works.

Mrs. Elkins died before the 10-year term of the GRIT, with 50 percent of her interest passing to Mr. Elkins, who died in 2006.  His undivided interests in the GRIT passed to his three children.  After his wife’s death, Mr. Elkins disclaimed a portion of his interest equal to the unused unified credit against estate tax so the disclaimed portion could pass to his children free of estate tax.  After issuing the partial disclaimer, he and his children entered into a co-tenants agreement stating that the art could only be sold with the unanimous consent of all the co-tenants.

The Tax Court held that Mr. Elkin’s agreement by which he waived his right to institute a partition action with respect to some of the works of art would be disregarded in valuing certain of the fractional interests, even though he relinquished an important use of his interest in those works.”

Find out more about the case by reading Mr. Russell’s article at the Accounting Today site or examining the full Tax Court decision. 

 

The Estate of Elkins included Art by Picasso, Jackson Pollock, Henry Moore, Paul Cezanne, and Jasper Johns