Appraisals And Revenooers


Now it so happens, in the actual operation of this section of the Internal Revenue Act, that there are occasions when a donor of books, manuscripts, paintings, securities, or real estate may actually profit by making a gift to an educational, religious, or charitable institution or organization. But we must assume that this is an accident—the donor, when he bought or created the book, manuscript, painting, stock, or building, did not plan ultimately to make a gift on which he would realize a profit. It merely happened, and one day he found himself the possessor of materials worth much more than his cost. His income bracket made it possible for him to make a gift and actually be ahead in dollars because he had made the gift. In the case of the securities or real estate, he could, if he chose, have converted these items into cash, taken his profit, and paid his capital-gains tax—he would still have been ahead of the game. But could he really have done this with his manuscripts, books, or paintings? Perhaps. That’s the big question the government asks and the appraiser must answer. He is required to state a figure that represents the price at which the object can be sold at the time of the appraisal or at the time of the gift. And he must be prepared to prove his case.

What should the would-be donor do? He should consult a capable tax attorney or accountant and use the services of competent appraisers. He should not do his own appraisals unless he proposes using an invoice for a purchase as the basis for the appraisal figure. The recipient institution should appraise only items of minor value (no gift in excess of $500); preferably, it should make no appraisals at all.

What should a donor expect from an appraiser? His appraisal document should fully describe the gift and should be interpretive. The document can note the collecting, historical, and literary value of the items involved and indicate the basis upon which a valuation has been established. The appraiser’s final decision should be dictated by neither donor nor recipient. His fee should not be determined by the value of the item appraised, lest he be tempted to fix a higher valuation to earn a higher fee.

Prospective donors will be well-advised not to fall victim to some of the folklore of the gift-appraisal field. Example One: “It’s none of the government’s business where or when an item was acquired; the only concern is the appraised value at time of the gift.” Wrong. The government can, and often will, ask where one purchased an item and how long one has had it, and can ask to see the original invoice.

Example Two: “Nine times out of ten the federal examiner is baffled by the whole business and passes it because he can’t figure it out.” Wrong again. Some of the valuation men do know some of the fundamentals of the collecting world. They are familiar with auction catalogues, Book Prices Current , and other guides, and often employ knowledgeable consultants.

Example Three: “A competent appraiser’s word is usually sufficient to satisfy the government.” Wrong; much more is required. The appraiser must show that a market exists for this material, and he must be able to cite instances where similar material has been sold for comparable prices. This can cause much agony in some areas. Let us suppose that a large collection of Gandhi letters were to come on the market. The owner wants to give them away. An appraiser agrees that they are valuable, but he can’t produce a record of a sale of Gandhi material for any substantial figure. What then? He will have to seek out some sale of material of an individual who may be accepted as comparable to Gandhi and use this as a basis.

Sometimes, unfortunately, there is a double standard in appraisal. Senator “X” makes a gift of his papers to the Library of Congress and claims a deduction on his tax return. His return is audited and passed. His regional I.R.S. office accepts the principle of his gift and agrees that his papers have value. They may question the amount of the valuation and there may be an adjustment, but in the main, the donor and the governmental agency are in agreement. “Thomas Z,” an author, makes a gift of his papers to his alma mater and files a tax return from his home. In his district, the regional office takes the position either that (a) the papers have no value whatsoever, or (b) they will accept a valuation only if “Z” can prove that other papers of his have been sold; that sale will be used as the guide. Even if the author is famous, if by chance no manuscript of his has ever been offered for sale, the government would refuse to accept any valuation! Of course, that seems preposterous, yet it has happened and is happening now.

Thus far, perhaps, I have devoted too much space to discussing money, and that is of little ultimate concern. Collecting is a noble pursuit. It is intellectual, it is stimulating, it brings benefits to many. The complete collector is not a grubby individual hotly in pursuit of a tax benefit or an honorary degree; he is a remarkably well-rounded individual whose knowledge, instinct, courage, and persistence all aid him in the hunt for the elusive, the mysterious, the almost unavailable, the unbelievable. He has knowledge and energy—although some money doesn’t hurt, either—and he generously expends all three in his quest. He spends his money willingly, because he believes that what he receives for his cash is worth it—not primarily in dollars and cents, but in an intimacy with the greatness of the past.