Tuesday, September 4, 2012

Rigorous Due Diligence: Tax and Appraisal Forms May Supply Important Information to Museums Regarding Antiquities

Object donated to the Walters Art Museum.
Source: AAMD Object Directory

Donated cultural artifacts listed in the annual reports of museums or on the Association of Art Museum Directors (AAMD) Object Registry do not always report the same information that the Internal Revenue Service (IRS) demands when a donor files for the tax deduction offered.  Sometimes the gift of a cultural object is made by a donor to his or her nonprofit foundation first and then to a qualified nonprofit museum, and sometimes the gift is made by the donor directly to the museum.  In either situation, there should be appraisal and tax records available upon request to a museum, which can examine these sources of information when conducting a rigorous due diligence collecting history investigation to determine whether to accession the cultural artifact.

IRS Publication 526 discusses charitable contributions in general and explains how donating property such as art and antiquities to a qualified organization can provide an income tax deduction to the donor.  A donor may also steer clear of capital gains taxes on appreciated assets by donating antiquities.

IRS Publication 561 discusses paintings, antiques, and other art objects.  Any antiquities that are worth $5001 or more "should be supported by a written appraisal from a qualified and reputable source." An appraisal is mandatory for any cultural object valued at $20,000 or more. The IRS writes, "If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request." The determination of authenticity for tax purposes is made by a qualified appraiser.

The IRS gives examples of what information should be included in a description of donated property, including:
  • the name of the artist or culture,
  • the approximate date of creation,
  • the cost of acquisition,
  • the date of acquisition,
  • the manner of acquisition,
  • a history of the item,
  • proof of authenticity, and
  • the facts on which the appraisal was based.
The donation information is placed by the donor on IRS Form 8283, submitted with the donor's regular income tax form.

These appraisal and tax forms may supply important authenticity and collecting history information to a museum's provenance curator or other official as a museum determines whether to accept the gift of an antiquity from a donor.

This post is researched, written, and published on the blog Cultural Heritage Lawyer Rick St. Hilaire at http://culturalheritagelawyer.blogspot.com. Text copyrighted 2012 by Ricardo A. St. Hilaire, Attorney & Counselor at Law, PLLC. CONTACT: www.culturalheritagelawyer.com