Trust bankers handling their clients' final affairs have long groused that it can take as long as three years to square away estates that include substantial art collections.
That's because the artwork appraisals submitted by executors often diverge from the value the Internal Revenue Service ultimately approves.
Now, the IRS has simplified the chore of getting art assessments approved. The agency announced Jan. 15 that it can issue advance statements of value on artwork before the nine-month deadline imposed on estate tax returns.
Many trust bankers think getting early confirmation of the value of an artwork will cut the cost of settling an estate.
"Time is money, because every time you do a tax return incorrectly you have to pay penalties and interest," said Kenneth M. Griffin, vice president of Westport Bank and Trust Co. in Connecticut.
Until now executors had to attach artwork appraisals to tax returns - and then wait for the IRS to send a closing letter ensuring that all the taxes were in order.
"We're trying to be more taxpayer-friendly to speed up the process," said Karen E. Carolan, chief of the art appraisals department at the IRS.
Re-filing taxes is a problem for many estate executors. Only half the items reviewed by the IRS are accepted at the appraised value. And any gap between appraised and approved value can create a tax headache for both the executor and the beneficiaries.
"There can be a legitimate difference that can translate into big dollars," said Warren A. Reintzel, senior vice president in charge of trust administration at Glenmede Trust Co., Philadelphia.
The IRS relies on six full-time staff members to handle assessments on artwork. But they get a big helping hand from the agency's Art Advisory Panel, a group of 25 volunteer art experts who are curators, collectors, auctioneers, and scholars.
This group, which meets twice a year under Ms. Carolan's watch, frequently can tell straight off the bat if an item is being assessed for a charitable tax deduction or for an estate tax.
Ms. Carolan said that photographs of artwork donated to charities are usually presented in high-quality transparencies while estate valuables are sometimes captured on Polaroid film.
"The ones with a hand holding it up or a painting leaning against a floral couch" are more likely to be from an estate seeking a lesser tax, she said.
The IRS' expedited service offering might create a backlog of work for the art squad. Sotheby's did 1,500 appraisals for $3 billion worth of estate art last year, which "constituted a fraction" of all appraisal work done nationwide, according to Richard S. Wolf, the auction house's senior vice president and director of trust and estate services.
