Mar 27, 2015

Estate Wins Ruling vs. IRS on Art Collection

Rumor has it that estate attorneys all over America are gleefully dancing around their desks.

The reason for the lawyerly ruckus was that the Internal Revenue Service had just lost a case with major implications for the estates of collectors. At issue was whether an estate could parcel out an art collection according to the rules of “fractional ownership.” Fractional ownership is an accounting method whereby several individuals can share ownership of a tangible asset. While this case involves a multi-million-dollar art collection, the tenets of the can be applied to any collector who wishes to make arraignments for dispersing a collection after their death.

Generally, the asset involved in a fractional ownership situation is something like real estate, a yacht, a racehorse or other high-value property. Sharing ownership in an asset also involves sharing the expenses involved in keeping the item: insurance, maintenance, storage and such.

Fractional ownership is an accounting method whereby several individuals can share ownership of a tangible asset. A recent case ruling finds that collectors can use the rules regarding fractional ownership to an art collection for estate purposes will affect owners of collectors big and small.

Texans James and Margaret Elkins shared an interest in their art collection with their three children. Their collection of 64 works was impressive and included artworks by Picasso, Pollock, and sculptor Henry Moore. When Mrs. Elkins died, Mr. Elkins allowed a 27-percent share of 61 works to pass to his children plus a 50-percent share in the three works by Picasso, Pollock and Moore. Read More

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