A series of adjustments and modifications of a tax base known as the “gross estate” determines federal estate tax liability. The top tax rate is statutorily set at 40%. The federal estate tax is a tax levied against the estate of a decedent, which must be paid by the estate upon the transfer of the property. What were the shortcomings of the appraisal conducted for the Kollsman estate and what are the lessons to be learned from this case? The valuation of art is not an exact science and may change depending on the “eye of the beholder.” However, in order to determine the precise tax liability of an estate, appraisers and estate executors must adhere to Internal Revenue Service (IRS) guidelines, professional codes of ethics, and the legal requirements within the Tax Code to ensure some level of objectivity and consistency. Commissioner of Internal Revenue demonstrates the importance of having a justifiable and objective appraisal when determining the tax liability of an estate. The opinion of the Tax Court in the Estate of Eva Franzen Kollsman v. The Tax Court dismissed Estate’s declaration and the valuations made by Wachter, finding that his valuations were “unreliable and unpersuasive” due to his direct conflict of interest and misconstrued analysis of the Old Master paintings. In reaching this decision, the Tax Court not only rejected but also criticized the appraisals made for the estate of the two Old Masters by George Wachter, Vice President of Sotheby’s North America and South America. The IRS claimed before the Tax Court that the Kollsman estate underreported the values of the two Old Master paintings resulting in a $781,488 federal estate tax deficiency. The assets at issue before the Tax Court were two Old Master paintings by Pieter and Jan Brueghel held by the decedent at her death. Tax Court ruled that the estate of a deceased New York woman, Eva Franzen Kollsman, undervalued $2.4 million worth of art on the estate tax return. ![]() By Emily Lanza Estate tax, death tax or inheritance tax? Pick one and pay up to 40% with first $5.4 mill exempt.
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