Taking Stock – The Importance of Archiving Your Assets

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antique furniture, Antiques, Appraisal, Appraising, Archive, artwork, Charitable Contribution, damage/loss, decorative art, Estate Appraisal, Fine Art, Insurance Claims, insurance scheduling, Inventory, jewelry, Matrimonial Appraisals, oriental carpets, Peace of Mind, personal property, personal property appraisers, silver

It’s human nature to keep thoughts of devastating fires, storms and theft furthest from our minds. But if disaster strikes, are you prepared? Having a detailed property inventory is the first step to ensuring that you will not only survive a damage loss, but that you will be made whole again.

So why is it that doing a property inventory is the last thing on our ‘to do’ list? Is it that taking inventory of our lives is too close to home? A property inventory is crucial not only to determine adequate amounts of insurance coverage prior to a loss, but it will also expedite the claims process after a loss has occurred.

Establishing adequate insurance coverage for the contents within your home is the driving force behind the decision to conduct a personal property inventory. Having an up-to-date inventory not only establishes your net worth of tangible property, it also helps you to adjust your insurance coverage accordingly. You may even discover that after your assets are valued you are under-insured, or better yet, over-insured, and paying too high an insurance premium.

However, there is another reason you may consider conducting an inventory. Perhaps you are relocating, scaling down or starting to consider which items to bequeath to loved ones. Whatever your goals, knowing the value of your property is the first step to making an informed decision.

Developing an Inventory/Appraisal

There are two common types of property inventories: written and pictorial. The ideal inventory combines both types of inventories, including a detailed written and enumerated inventory that is supported by photographs of the property. There are many different software options out there to help with the inventory process, however it is essential that you have a value to go along with the description.

After the Inventory/Appraisal

After you have developed your inventory or received your appraisal it is important to store a backup copy at an off-premise location, such as a safe deposit box or with a trusted relative. You should also provide a copy of your inventory/appraisal to your insurance agent and use this document to review your current content coverage to make any necessary adjustments. In many instances, the valuable items, including antiques, silver, Oriental carpets and jewelry may not be covered under your general homeowners insurance. Specialty items often require special coverage beyond the basic contents coverage. This additional insurance coverage is referred to as a rider or floater and provides the policyholder with extra protection beyond the provisions contained in a standard insurance agreement.

Updating the Inventory

The property inventory should be updated every six months to one year. The appraisal is required by the insurance industry to be updated every three years for adequate insurance coverage. If you are in the process of re-furnishing your home or collecting, be sure to continuously collect receipts from new purchases and keep them entered in a database.

Tips for Pictorial Inventories

• Take wide-angle photographs or a video of entire rooms.

• Take individual, close-up shots of expensive items.

• Zoom in on important labels and special features such as signatures of paintings, underside of an antique vase, close-up image of the reverse of an Oriental carpet to illustrate the foundation weave, and the secondary construction of antique furniture, i.e., the drawer frame.

• Take photos of the interior of cabinets, and drawers to illustrate the contents.

• Label each photo with the description, item name and date.

Although it is always important to document the big ticket items, such as artwork and antique furniture, don’t forget that the small items such as decorative art and silver can really add up. At some point in our lives there comes a time when we need to take stock of all the personal artifacts we have inherited and/or accumulated along the way. Don’t wait until it’s too late, for you never really know what you have until you have lost it.

The above article was written by Martine M. White of Bernards Appraisal Associates, LLC, in Gladstone, New Jersey. Ms. White is a Senior Certified Appraiser of Antiques & Decorative Arts with the American Society of Appraisers and the Appraisers Association of America. Ms. White has been appraising personal property in the Metropolitan area since 1988. Martine and her associates specialize in appraising fine art, antique furniture, Oriental carpets, silver and jewelry. Martine can be reached at 908.234.1153.

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Mixed Messages in 2012 Auction Art Sales

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art, art market, art sale, auctions, Christie's, Miro, Monet, painting, Rothko, Sothebys, Warhol

Is the art market’s pace giving us mixed messages? How is it that the major auction houses have painted completely different art sale pictures?

In 2012, Christie’s sold a total of $6.3 billion worth of fine and decorative art which included $5.3 billion in auction sales and $1 billion in privately brokered art sales. While auction sales at Christie’s increased 10%, their privately brokered sales rose $26%. In contrast, during the same period, Sotheby’s auction sales fell 12%, despite their successful single night contemporary art sale of $375 million, and an additional $695 million in private art sales.

Although Christie’s managed to win a larger share of the trophy art that came up for sale in 2012, could the divergent sales results from the rival auction houses indicate collector ticker shock? In an arena that relies on acquiring the heavy hitters like Rothko’s “Orange, Red, Yellow” that realized $86.9 million and Monet’s “Water Lilies” that brought a record $43.8 million, still there are other factors that are contributing to Christie’s success. One explanation by Christie’s chief executive, Steven Murphy, is the influx of new buyers from the U.S. and Europe who came seeking artwork at online auctions for under $500,000. The other prominent factor is the financial guarantee that auction houses offer to woo heavyweight sellers. This undisclosed amount offered to the seller guarantees that their artwork will sell for a specified price, even if there is no competitive bid. Deemed to risky during the recession, today guarantees are once again commonplace.

The biggest Christie’s sale for the year included Andy Warhol’s $43.8 million “Statue of Liberty” and Yves Klein’s $36.8 million “The Pink of Blue.” While Sotheby’s pieces included Rothko’s $75.1 million “No.1 (Royal Red and Blue)” and Joan Miro’s $36.9 million “Blue Star.”

As the winter 2013 auctions get underway in London, they will once again contribute to the overall art sales, and perhaps paint us a more complete picture of the trends influencing the art market.

Image: Joan Miro’s “Blue Star”  Resource: The Wall Street Journal Corporate News, January 17, 2013

 

Un-Saleable Artwork: Does It Have Value?

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art collector, art market, artwork, Canyon, IRS Guidelines, masterwork, Mus, Rauschenberg

The lawyers representing the heirs of art dealer Ileana Sonnabend intend to debate whether the IRS can establish a value of artwork that cannot be sold, in order to collect $29 million in taxes.

The artwork under discussion is “Canyon” a 20^th Century mixed media work created by Robert Rauschenberg in 1959 that was inherited by Mrs. Sonnabend’s children when she died in 2007. Since the sculpture contains a stuffed bald eagle, a bird that is under the Federal Protection Act for Endangered Species, the heirs would be committing a felony if they tried to sell it. As a result, their appraisers have valued the work at zero.

However, the IRS has an altogether different opinion – they valued “Canyon” at $69 million and they are demanding that the heirs pay $29.2 million in estate taxes. If it is illegal to sell the work, how can the IRS value it at $69 million? Although “Canyon” is a landmark masterwork of postwar Modernism, three appraisers including Christie’s had valued it at zero. In fact, many tax lawyers, estate planners and art collectors are astounded with the agency’s decision considering the I.R.S. guidelines stipulate that in figuring an item’s fair market value, taxpayers should “include any restrictions, or covenants limiting the use or disposition of the property.” In this case, the 1940 Bald and Golden Eagle Protection Act and the 1918 Migratory Bird Treaty act make it a crime to possess, sell, purchase, barter, transport, import or export any bald eagle – alive or dead. Although Mrs. Sonnabend was able to maintain ownership of “Canyon”, in 1998 Rauschenberg was required to submit a notarized statement attesting that the eagle had been killed and stuffed long before the 1940 law was established. Further, the I.R.S. claimed that ownership could only be retained if the work remained on a long-term loan basis at the Metropolitan Museum of Art in New York.

The attorney’s for the clients contend that the I.R.S.’s handling of the work has been confusing. Last fall the agency valued “Canyon” at $15 million and after the family refused to pay the taxes the agency sent a formal letter stating they increased the value to $65 million. Evidently, the new valuation came from the agency’s Art Advisory Panel that is made up of experts and dealers who advise the I.R.S.’s Art Appraisal Services Unit. One member, Stephanie Barron, a senior curator of 20^th Century art at the Los Angeles County Museum of Art, where “Canyon” was exhibited for two years said “the group evaluated the work solely on its artistic value without reference to any accompanying restrictions or laws.”

Why didn’t the I.R.S. Art Advisory Panel include the governments endangered species restrictions when determining their valuation? Can artwork be valued solely on artistic attributes? Is the I.R.S. using a hypothetical black market sale scenario to base their valuation and presume that the taxpayers would engage in an illegal activity in order to sell their assets?

At the moment the heirs are clearly in a bind. If they don’t pay the taxes the I.R.S. claims is due, they would be guilty of violating federal tax laws and if they try to sell “Canyon” in order to pay their tax bill, they could go to jail for violating eagle protection laws. And since the heirs assert that “Canyon” has no dollar value, they could not claim a charitable deduction by donating the work to a museum.

It appears that the government has unfairly painted the taxpayers into a corner leaving them with no choice but to challenge the I.R.S.’s decision. Perhaps a new court precedent will be established when they both meet next month to debate in Washington.  From an appraisers standpoint, a value range of zero to $69 million is difficult to fathom!

Resource: The New York Times, Art Piece’s Sale Value? Zero. But the Tax Bill? $29 Million, Patricia Cohen