In Uncategorized on 02/22/2017 at 16:53

That ancient cry rings no bells with Judge Gale, as he discusses the cleaning of Old Master paintings in Estate of Eva Franzen Kollsman, Deceased, Jeffrey Hyland, Executor, 2017 T. C. Memo. 40, filed 2/22/17.

The late Eva was another art collector with a collection to die for, and she did. She was a heavy smoker, and her Breughels were unclean.

And it is uncertain if Jan Elder or Jan Younger did one of them, and to what extent the studio was involved.

It’s the usual estate valuation mix-and-match.

The estate’s lead witness is a co-chair of Sotheby’s Old Masters squad. He downgrades the paintings’ values, because they are extremely dirty, and the dirt may hide a multitude of sins. But ex’r Jeff goes to a leading cleaner of such works, who makes them come alive with mild cleaning stuff at a cost less than $9K.

Turns out the Sotheby’s squad leader was angling for auction rights, and got them. Art auction commissions make stockbrokers and real estate brokers look charitable.

This is a heavy conflict-of-interest, and makes Judge Gale regard the squad leader as unclean. He wants the auction rights, so he’ll low-ball the valuation.

Insurance policies rarely reflect FMV, unless supported by appraisals, and neither the late Eva’s, nor ex’r Jeff’s, gives any basis for a valuation decision.

IRS’ expert has got comparables, which ex’r Jeff’s squad leader does not. So although IRS’ expert doesn’t ding for dirt, Judge Gale cuts 5% because the major painting (Peter the Elder) was dirty, but the cleaning risk was low. The painting cleaned up real nice.

As for the attribution risk on painting number two, Jan Younger is a poor bet; Jan Elder is the real deal. So Judge Gale cuts IRS’ expert by 25%, 10% for attribution, 5% for dirt, and 10% because the Jan, older or younger, painting was “bowed.”

I’ve stated before that Tax Court gets more valuation cases than almost any other court. This case gives a look at how the process works.

Takeaway- If your expert wants any piece of the action, walk away.


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