Revaluing Family Treasures for the Taxman

Posted by on Feb 11, 2016 in Blog Posts | No Comments

A key point to bear in mind when reading the following article:  When it comes to the valuation of an estate—real property, assets and collectibles—the official date of valuation is the date of the decedent’s death.*  To clarify, if Mrs. Wallace (the surviving spouse) passes away on June 1, 2013, all property in the estate, including the fine art and collectibles, will be valued as of June 1, 2013, and only comparable sales prior to that date can be used by the appraiser in determining Fair Market Value.  And so, for example, if Mrs. Wallace had had a significant Alberto Burri painting her collection, the estate valuation would be based on prices prior to June 1, 2013, and not after the Guggenheim in New York mounts a major retrospective of the artist’s work (Fall 2015), which likely spurred interest (and prices) in the artist’s paintings and collages.

(Spoiler Alert) I and several of my colleagues have marveled at how the collectible car market has dramatically spiked in recent years. That said, although the €70M value the family submitted for the Ferrari collection, as part of their mother’s estate tax filing, may have been a bit low, it probably wasn’t as (dramatically) off as the article below infers.  In the US, while the collection is currently valued at €200M, the estate valuation is still valued as of the date of death, in that, the day mom died two plus years ago.  (Jennifer Stoots, AAA)

“Revaluing Family Treasures for the Taxman”

NEW YORK TIMES | by ROBERT FRANK

On Friday, a bright red 1957 Ferrari rolled onto a stage in Paris and sold for 32 million euros, or about $35.8 million, making it, by some measures, the most expensive car ever sold at auction.

The celebrated racing car captured the attention of wealthy car collectors around the world — as well as the interest of the French tax authorities.

The Ferrari was sold by the Bardinons, a prominent French family whose members are feuding with one another and the French government over their famous Ferrari collection.

For tax purposes, some members of the family initially valued its stable of over a dozen Ferraris at around 70 million euros, or $78 million. And yet experts say the collection could be worth over $200 million. Especially after Friday’s sale, the French tax authorities are likely to take a closer look at the family’s math.

“This case is like a thriller,” said Vincent Grandil, a leading French tax lawyer with the firm Altexis.

The battle over the Bardinon Ferraris highlights an increasingly popular tax strategy being used by wealthy families around the world. Art, vintage cars and other collectibles passed down to family heirs are often subject to estate taxes or gift taxes. Yet the values of these trophy assets can often be subjective. So some families are using special appraisers and selective data to value their family heirlooms and lower their tax bill.

… To read the rest of the article, please visit The New York Times

*It is my understanding that a family may choose to have the assets in the estate valued 6 months after the decedent’s death, as an alternative valuation date.  To learn more about the rules of estate tax filing, it is best to consult with an estate attorney or CPA.

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