Question: An artist is donating a work to a museum. I understand they can only deduct the cost of the materials, which in this case is over $21,000. Since this amount is over the $5,000 threshold, is a written appraisal required or do they just submit receipts?
Answer (from Karin Gross, Office of the Chief Counsel for the IRS:Yes, the artist needs to have the work appraised. The fair market value allowed would either be the cost of the materials or the value based on comparable sales – whichever is less. (Just because an artist has $21,000 in materials doesn’t mean it would sell for that much.)
Aside (Leon): The item must be appraised for fair market value using the sales comparison approach. If the comparables suggest the piece has a fair market value of only $5,000, that’s the amount – not the $21,000. Very interesting!
Trivial Pursuit III
Tidbits Taken From our Core Course Exam
These statements are ALL TRUE!
Tidbits Taken From our Core Course Exam
These statements are ALL TRUE!
- A USPAP certification must be proceeded by the words identical or similar to “I certify.”
- An electronic signature is acceptable in an appraisal report.
- The present worth formula is often used in an appraisal blockage analysis.
- Age-life depreciation is often applied without discrimination to the property’s condition or to the property’s level of use.
- Appraisers are responsible for recommending to their client if authentication should be done.
Would it not also be appropriate to consider the cost approach.......the cost to reproduce the artwork?
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