Appraisal of Art and Collectibles

Appraisal of art (or any collectible) can be a complicated process with a lot of things to consider. Richard has assembled some questions you might have about the process and some answers that might help an owner (or appraiser) make more informed decisions.

  • Treasury Regulation § 20.2031-1(b) defines fair market value as the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.

  • It depends on the item. In Anselmo v. Commissioner, the Court quoting Treasury Regulations § 20.2031-1(b) held that the value of gems was the aggregate price that would have been paid for them when purchased in the market in which such stones are "most commonly sold to the public." Id. at 882.

  • In Goldman v. CIR, 388 F. 2d 476 - Court of Appeals, 6th Circuit 1967, the Court held that the buyer is the ultimate consumer and not what would be paid by a dealer at wholesale. Id. at 478

  • Since the market cannot absorb a massive amount of an artist's work all at once without a price collapse, a proper appraisal would demand a discount to the total value of the collection commonly referred to as a blockage discount.

    This concept often arises when artists pass away. Often the estate values the estate lower than the IRS so as to pay the minimal amount of estate tax. The IRS litigated the value of the estates of Michael Jackson.

    In order to calculate the discount, courts will require a present value calculation. see Calder v. Commissioner, 85 TC 713, 718 - Tax Court 1985.

    A seminal case on blockage discounts was Estate of Georgia T. O'Keeffe v. Commissioner, T.C. Memo. 1992-210 which held that not all work by the same artists is evaluated in the same manner. Namely, works in high demand can be received by the market readily and receive a low discount. On the other hand, works in low demand receive a high discount because it would take longer or the market to sell them. Id. at 2702.

  • Uniform Standards of Professional Appraisal Practice (USPAP) governs how some appraisers will go about determining value.

    Courts will use it to evaluate an appraiser’s performance. In Jackson Stone South LLC v. Commissioner, T.C. Memo. 2025-96 (September 2025), the Court stated compliance with USPAP is an indication that the appraiser's valuation report is reliable, but full compliance with USPAP is not the sole measure of reliability. Id. at 37.