A long awaited tax court decision in the matter of Elkins v Commissioner was recently decided on appeal in a Fifth Circuit court decision. The issues surrounding this case included effective estate planning and fractional ownership interests in art.  At the core of the case was: how substantial is the effect of fractional (partial) ownership for artworks and how much should it be discounted. It seems that it boils down to liquidity. If you own a ¼ share of a painting worth $1 million, your ability to sell that share may not be the equivalent of $250,000.00, or will it? The answer is: it depends. In the case of the Elkins family, the way their trust was set up and life events that occurred in ensuing years contributed to the tax court decision to rule for a 10% discount, which on appeal was increased to the 44.75% discount opined by the taxpayer’s experts.  In reading the decisions, it seems that when it comes to art, nothing is clear cut.  Millions of dollars are spent on litigations based on inconclusive evidence.  Perhaps the IRS did not argue for discount because they did not want to go on record for any percentage that could be used as a basis of measurement for ongoing cases. 
   
Effective tax planning for transition and maintenance of personal property is tantamount to knowing what you own and what its value is prior to initiating any program.  Start with an appraisal by an independent, experienced and accredited appraiser who will provide a picture of the market-universe and how your property fits into it.  This is not an easy thing to do. Appraisal is a process.

And remember, there is a difference between price and value.