Now for something complicated and fun (at least within the parameters of estate planning). An art collector died owning an art work which contained a stuffed eagle. The art was on display at the MoMA under an agreement after the federal wildlife service tried to confiscate it in the 80s.
Because the sale of dead eagles is prohibited by federal law, the estate appraisers valued the art at $0 because there is no market for it. The IRS said it was worth $15 million. When the estate rejected that valuation, the IRS played hardball and said it was worth $60 million and levied penalties for undervaluing it plus interest. The estate tax alone on this art would have been $27 million. The estate and IRS finally settled the matter when the estate donated the piece to MoMA and the IRS dropped the estate tax issue.
Couple of points:
1. The family had not benefited from this art for 20 years due to the previous agreement to keep it on display.
2. I do not agree with the assessment that art with no market is worth $15 million. Assets are worth what a willing buyer and willing seller agree upon. If there are no buyers, there is no value.
3. The collector's estate had paid $470 million in estate taxes already and had sold $600 million of art to do so.
4. The author is wrong about the charitable deduction. The estate did receive a charitable deduction for the value of the art work which is why ultimately there was no tax on it.
5. Never pick up an eagle feather. It is illegal to do so and subject to a $25,000 fine. Unless you are a Native American or a member of the Screaming Eagle division of the US Army.
