In Uncategorized on 07/27/2020 at 15:26

But Is Appraiser Qualified?

No Court does as many appraisal trials as pore l’il ole Tax Court. See my blogpost “Letter to the Editor,” 11/19/13, where I expatiate.

Today we have another summary J joust about an expert’s valuation, a coupled entry WT Art Partnership LP, Lonicera LLC, Tax Matters Partner, et al., Docket Nos. 28440-15, 19604-16, filed 7/27/20. And it falls that versatile unraveller of arcane appraisals, Judge Albert G (“Scholar Al”) Lauber, to deal with China Guardian Auctions Co., Ltd., of Beijing, China. The Chinese guardians tacked values to five (count ’em, five) Chinese paintings, which WT donated to an institution I have loved from boyhood’s early hour, the Metropolitan Museum of Art.

Even I have given them a few dollars.

WT took charitable deductions aggregating $75.5 million. Regrettably, I could not deduct anything like that.

The Chinese guardians identify “… four employees of China Guardian who worked on the five appraisals under Ms. Wang’s [president] supervision. WT Art subsequently identified Yin Guanghua as the individual who ‘performed the most important, substantive work’ underlying all five appraisals. Mr. Yin later testified in a deposition that he had appraised all five paintings. In that deposition he described his qualifications, stating that he has studied Chinese art for more than 50 years and was a protégé of Xu Bangda, whom Mr. Yin described as one of the most prominent art appraisers in China. Mr. Yin testified that he appraises thousands of artworks every year.” Order, at p. 2.

IRS is all over the guardians.

” Respondent contends that he is entitled to summary judgment in both docketed cases because none of the five appraisals satisfies the statutory and regulatory requirements for ‘qualified appraisals.’ Respondent alleges that draft documents were prepared by U.S. persons affiliated with WT Art and that China Guardian in effect acted as an ‘accommodation party’ by signing the appraisals. Respondent contends that neither Ms. Wang (who signed each appraisal on behalf of China Guardian) nor any of the four individuals who allegedly worked under her supervision were ‘qualified appraisers’ because they: (1) did not regularly perform appraisals for compensation, I.R.C. § 170(f)(11)(E)(ii)(II); and (2) did not possess appraisal certifications or otherwise have the requisite background, experience, or education. I.R.C. § 170(f)(11)(E)(ii)(I); sec. 1.170A-13(c)(3)(ii)(F), Income Tax Regs. Respondent contends that China Guardian and its staff cannot be ‘qualified appraisers’ in any event because China Guardian was ‘regularly used’ by WT Art and did not perform a majority of its appraisals during the taxable year ‘for other persons.’ Id. sec. 1.170A-13(c)(5)(iv)(F). Finally, respondent contends that the appraisals were not conducted under the U.S. ‘Uniform Standards of Professional Appraisal Practice’ or otherwise ‘in accordance with generally accepted appraisal standards.’ I.R.C. § 170(f)(11)(E)(i)(II).” Order, at pp. 3-4.

Judge Scholar Al says the China guardians don’t have to touch all the bases, because Bond; provisions cited directory, not mandatory; substantial compliance, y’know.

Besides, IRS’ points are fact-driven, and this is a motion for summary J. “The statutory and regulatory provisions on which respondent relies–requiring that we determine whether China Guardian and its staff ‘regularly performed’ appraisals, whether China Guardian was ‘regularly used’ by WT Art, and whether its appraisal staff had the requisite background and experience–present factual questions that seem ill-suited to summary adjudication. And we do not believe that WT Art should be foreclosed from showing that the appraisals were prepared ‘in accordance with generally accepted appraisal standards’ even if the Chinese appraisers did not consciously follow the U.S. Uniform Standards.” Order, at p. 4.

But IRS goes down fighting. IRS “… contends that the appraisal of ‘Tiantai Mountains’ improperly valued the entire work rather than the 40% interest that WT Art actually donated…. And he contends that the appraisals of the two paintings… were inadequate because they specified a range of values, rather than a single definitive value, for each painting. It would seem to us that these arguments are directed to the correctness of the valuations, not to the qualified nature of the appraisals. In any event, since trial will be necessary in both consolidated cases, we see little to be gained by addressing these arguments now.” Order, at p. 4.

Speaking of my personal faves, why not bring in the Antiques Roadshow guys, James Callahan, Sachiko Hori, and Lark E. Mason?






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