The Eagle Has Landed in Tax Court

This is a remarkable story.  The IRS has taken the position that a work of art that is illegal to sell because it contains a stuffed bald eagle nonetheless has a fair market value of $65 million for estate tax purposes.  The standard approach to valuing assets for most purposes under the tax code is determining the price at which the asset would change hands in a transaction between unrelated parties, neither of which is under a compulsion to buy or sell.  If you can’t sell it, common sense says it should have a zero FMV.

I am sure there are exceptions, such as stolen property and narcotics, where the IRS has taxed individuals on the street value of items in their possession despite the items’ illegality.  But I can’t think of a comparable situation where a transfer tax has been assessed on an item that is legal to own but illegal to sell.  It will be interesting to see how this turns out.

About Conrad

Conrad O'Connor is the nom de web of a tax lawyer working in Atlanta, Georgia.
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