Does an eagle feather, rare by virtue of its endangered species status, retain its value if banned for sale by the US government? The trade or sale of eagle feathers or parts is prohibited by two federal laws, a ban in effect for decades. The purpose of these laws is to protect the viability of the wild eagle population in the US despite the fact that few people will likely encounter much less own an eagle feather. Now a federal ban has been proposed by the US Fish and Wildlife Service on the sale or trade of ivory in an effort to protect endangered elephants. The issue of fair market valuation of endangered collectables has sometimes affected the tax owed by an estate. With the impending federal ban on the trade or sale of ivory, the issue has potential to affect many more estates.

How does one place a fair market value on an item banned from trade or sale, and thus has no resale value? That was the question facing the beneficiaries of the Estate of Ileana Sonnabend. A renowned art dealer, Ms. Sonnabend died in 2007 at the age of 92 leaving an estate worth a billion dollars, almost entirely comprised of artwork she had acquired. In the late 1950s, she became known for introducing Europe to American art, namely the pop art of Jasper Johns, Roy Lichtenstein, Andy Warhol and Robert Rauschenberg.

Among her numerous works of art, one was deemed her favorite, Robert Rauchensberg’s 1959 piece entitled “Canyon”. Labeled a combine, or mixed media work, it incorporates a black taxidermied bald eagle that sits on a plank of wood jutting out from the bottom of a canvas collage backdrop. Whether or not one enjoys Rauschenberg’s artwork, it is undeniable that “Canyon” is a striking piece of art. Since it contains a taxidermied bald eagle, it is protected under federal laws (the 1918 Migratory Bird Treaty Act and the 1940 Bald and Golden Eagle Protection Act). These laws make it illegal to possess, sell, purchase, barter, transport, import or export wild eagles, dead or alive. In 1998 the US Fish and Wildlife Service asked about the origins of the subject eagle. Mr. Rauschenberg signed an affidavit stating that the eagle was old enough to be legal. Apparently, an artist friend found the eagle, discarded in the hallway of her apartment building. She rescued it from the trash and gave it to Rauschenberg. The eagle belonged to an aged tenant who in his youth was a member of Teddy Roosevelt’s Rough Riders. The eagle was acquired from the wild and taxidermied prior to 1940. Ms. Sonnabend was only allowed to retain ownership because it was continually an exhibit at a public museum.

The beneficiaries, a daughter and adopted son, had the piece appraised by Christie’s auction house. With no resale value in the auction market, Christie’s took a controversial position that its value was zero. In 2012, the Art Advisory Panel, a panel of art experts charged with reviewing appraisals on behalf of the IRS, took a vastly different view valuing “Canyon” at $65 million and imposing on the Sonnabend estate a tax deficiency of $29.2 million plus $11.7 million in penalties.

Initiated in 1968, the Art Advisory Panel is comprised of well-known art curators, gallery owners and art moguls who evaluate on the IRS’s behalf appraisals submitted by taxpayers as part of their income or estate tax returns. These experts presumably know whether the art is appropriately valued because of their experience in art markets. The goals of the IRS and the taxpayer are, of course, at odds. If the taxpayer is looking for an income tax deduction, he wants a high appraisal value to obtain a greater deduction. If the art is appraised for an estate tax return, a lower value would result in a lower estate tax.  Artwork appraised at more than $50,000 triggers review by the art advisory panel. The panel may agree or disagree with the appraisal. In fact, the panel’s own statistics reveal that there is a 50-50 chance their review will increase the stated appraisal value. There is a further appeal process but the panelists, who volunteer to be part of this prestigious panel, are rarely overturned by the IRS.

The Sonnabend estate’s attorney argued that, since it was illegal to sell “Canyon” due to its inclusion of the taxidermied eagle, the fair market value had to be zero. The Art Advisory Panel dismissed the idea that such a landmark piece in postwar modernist art could be valued at zero. The IRS acknowledged that the sale of “Canyon” was illegal, but further argued that there could be an underground market for it, for example, a reclusive billionaire in China who might purchase and hide it.

Ultimately, the IRS settled with the beneficiaries who were compliant taxpayers, dutifully paying more than $470 million in Federal and State estate taxes relating to their mother’s art collection.  The IRS agreed that if “Canyon” were donated to a museum no estate tax would be assessed.  The beneficiaries gifted “Canyon” to the Museum of Modern Art in New York, which recently held an exhibition of selected artwork from Ms. Sonnabend’s collection. It is not surprising that “Canyon” was the showing’s central piece. Some sources in the auction world were disappointed that the Sonnabend case settled. Had it been litigated, a court might have determined whether a zero valuation is appropriate for items that have been prohibited from sale such as eagles and, now, ivory.

The issue of lost resale value is the same, but the proposed ban on ivory will affect many more individuals and estates. Recent excavations of the east African coastline have revealed that the ivory trade began as early as the 900s. Ivory has been utilized across various industries and can be found in artwork, musical instruments, chess sets, furniture, gun handles, pipes, piano keys, cutlery handles, tea sets, snuff bottles, dices, billiard balls and souvenirs, to name a few.

Issued in February 2014, the proposed ban by the US Fish and Wildlife Service has not yet become a regulation. The proposal would prohibit the import or export and interstate sale of any items containing any amount of ivory unless certain criteria are met. Possession and intrastate sale of ivory would still be allowed. Since the directive might be changed before its implementation in June, major auction houses have been reluctant to place lots of ivory up for sale.

Although an exception has been carved out for the sale of  legitimate “antiques”, the definition of an antique has yet to be finalized. Thus far, an ivory owner would have to prove that the item was more than 100 years old and that it arrived in the US through one of 13 American ports authorized to permit ivory goods. More troubling is the fact that these 13 ports did not have legal authority until 1982, making it nearly impossible to prove that an item, perhaps created or acquired centuries before, is a legitimate ivory antique. The chances of an antique owner having certification as to the age of an antique item are small. The draconian rules would apply to all ivory in the country and will prohibit millions from selling their ivory and obtaining a return on their investment.  Since the directive, musicians have traveled less often for concerts overseas in fear that their prized musical instruments containing small amounts of ivory will be confiscated. Not surprisingly, the directive has caused an uproar by various industries, such as musical instrument manufacturers, gun manufacturers, piano dealers and auction houses.

A representative of a major auction house expressed dismay at the proposed ivory ban acknowledging that it is a very hot topic. Since the proposal is still in flux, auction houses hesitate to place ivory up for auction. Further, the representative told me that, if asked to appraise an item which cannot be legally imported, exported or sold via interstate commerce then her position will be the same as it was in the Sonnabend case, that the object has no fair market value.

Many question whether the ivory ban will accomplish the stated goal of US Fish and Wildlife Service to slow the illegal hunting of endangered elephants.  Some question how criminalizing aged ivory transactions in the US will save more elephants. Though conservation of endangered creatures is a worthy goal, eliminating the resale of a Steinway piano with ivory keys created 90 years ago is unlikely to protect live elephants.

Looking ahead, estate lawyers, planners, and clients must ponder how the Art Advisory Panel will treat income and estate tax returns which include undocumented ivory collectables. If they have no market value, a deduction may be lost when a gift of an ivory collection is made to a public museum. Or, the panel may ignore the prohibition (as they did in the Sonnabend case) and issue an appraisal value based on what they deem to be the item’s artistic value, even though that market has been eliminated. If so, the IRS will expect the taxpayer to pick up the tab. It may be that litigation of a test case will have to settle the issue.


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