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Chatelaine's Antiques & Appraisals Magazine > Market Notes > Feature: IRS v. Appraisers: Most Valuations Rejected



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Agency Rejects More than 50% of Appraisals

The annual Internal Revenue Service report on appraisers is out, and once again it's a doozy.
In 1999, the IRS's Commissioner's Art Advisory Panel reviewed appraisals of 657 items. It rejected more than half in fact, 54 percent of them.
The panel automatically looks at property appraised at $20,000 or more, as well as select items worth less. The panel is made up of curators, historians, and art dealers who pass judgement on the valuations submitted by appraisers.

In the estate and family gift area, the panel reviewed 612 appraisals and adjusted more than half of them.
Broadly, the appraisals fall into two categories those for estates, where low values mean low taxes, and those of artworks being donated to charitable institutions, where high values mean big deductions.
Regarding 45 works donated to charities, 63 percent were adjusted downwards, reducing the values by 49 percent. The values of three, however, were increased by a total of 67 percent.
In the estate and family gift area, the panel reviewed 612 appraisals and adjusted more than half of them. Of those adjusted upwards, taxpayers claimed values totaling $112.7 million. The IRS put the values of the same works at $180.8 million.
In an interview with the ARTnewsletter, panel chairperson Karen Carolan said, "Some years are better than others." In 1998 the panel had accepted 54 percent of the valuations submitted.
On the problem of appraisers undervaluing estate property and optimistically assessing donations to museums, she said, "The IRS doesn't recognize a difference between valuing objects in an estate and [valuing them] in a charitable situation." She suggested that values should be absolute, rather than slanted toward the use the taxpayers wanted.

There are a number of inaccuracies in that report.
Not everyone takes the IRS's findings at face value. "They're not exactly the most neutral source," said one dealer and appraiser.
But IRS spokesman Donald Roberts said, "There's no bias there." He added, on an up note, "The appraisals seemed better documented than in the past."
Another critic was Victor Wiener, executive director of the Appraisers Association of America, said, "There are a number of inaccuracies in that report, which is founded upon misrepresentations of the documents that are sited. It is filled with misstatements. I will be writing an article on it in our association's newsletter in the next few months."

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