Appraisals, Tax Deductions, and Your Heirlooms &
Collectibles
With the amazing success of the Internet auction site eBay
and Public Television’s program “The Antiques Roadshow,”
it’s no wonder that more and more people are asking museums
to appraise their heirlooms and other treasures. While
museums can often help with identifying a “whatsit” or
placing an item in a historical context, museums are limited
in their ability to provide appraisals or offer tax advice.
The Rogers Historical Museum staff do not have expertise in
these matters. This information has been synthesized from a
number of sources (see “Credits”) as a convenience for the
Museum’s patrons. Because these issues are complicated and
the laws and policies surrounding them subject to change,
anyone seriously interested in appraisal or charitable
donation tax information should seek expert advice and/or
qualified legal assistance.
What is an appraisal?
An appraisal is the valuation of property by the
estimate of an authorized person.
How are objects valued?
In many ways. Objects have a variety of values such as
sentimental, historical, artistic, educational, or monetary.
For museums, the first four values impart the most meaning
and relevance to their collections and the communities they
serve. Monetary value does have its place in museums,
however, for purposes of insurance and deaccessioning (the
formal removal of collections). The insurance industry
considers other values as well, including replacement cost
(the cost necessary to replace a new or used item with a
comparable item), reproduction cost (the total cost of
making an exact replica), and fair-market value (defined by
the U.S. Treasury as “the price at which the property would
change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or sell, and both
having reasonable knowledge of relevant facts”).
What affects an object’s monetary value?
Many things. Condition, scarcity, and historical
importance and documentation can all affect value. If your
object is in poor shape, one of many, or doesn’t have a
distinguished “pedigree” or a clear provenance (origin) then
its value is likely to be considerably less than an object
that meets these criteria. Other factors, such as markets
and regionality, are important as well. The popularity of
specific collectibles can wax and wane through the years,
turning what once sold for $10,000 into something with a
current value of $2,000. If an object is up for sale in a
region which has available many similar items or doesn’t
have relevance for local collectors, chances are the selling
price will be low. Keep in mind that the value of an object
is only as great as what an interested party would be
willing to pay for it in a certain location at a specific
point in time.
How can I determine the monetary value of my object?
Through research. One way to make an educated guess
about value is to look for “comps” (comparables). Seek out
collector’s books, magazines, and value guides at the
library or arrange for their interlibrary loan. Visit area
flea markets and antiques stores to determine local market
price and search out Internet antiques dealers to see how
they price similar merchandise. Look at auction house bids
or on-line auction sites to gauge the going rate. Another
way to determine value is to use a qualified appraiser.
How can I find a qualified appraiser?
With care. There is no federal or state legislation to
regulate the appraisal profession, so anyone can be called a
personal property appraiser regardless of expertise or
training. However, some national and international appraiser
societies offer training courses for their members and/or
test them periodically on their knowledge of appraisal
procedures, ethics, law, etc.; two such organizations are:
American Society of Appraisers
1-800/ ASA-VALU
www.appraisers.org
International Society of Appraisers
206/ 241-0359
www.isa-appraisers.org
Keep in mind that membership alone in a reputable appraisal
society does not constitute an endorsement of the appraiser.
To find an appraiser working in a certain area, check the
phone directory, search the Internet, or contact an
appraisal society for a list of nearby members. Although
appraisals are available on-line (offering appraisals based
on electronic images of the object), be aware that most
insurance companies and the IRS do not accept such Internet
value estimates.
Can a museum recommend an appraiser?
Perhaps, but with some limitations. Because there are no
formal certification procedures for appraisers, it is
difficult to know who is truly qualified. Therefore, museums
are very cautious when asked to recommend an appraiser for
fear that they may inadvertently be responsible for an
incorrect object valuation. They also don’t want to be
viewed as endorsing one particular appraiser over another,
so instead of providing a single name of an appraiser, a
museum may provide two or more names or the names of
everyone it knows of working in its area. It is then up to
the object’s owner to determine the qualifications of any
chosen appraiserWhat questions should I ask an
appraiser?
- How often do you perform appraisals?
- What are your qualifications (e.g., educational
background, appraisal course work) and your particular
expertise with this item? Some appraisers are
generalists and know a little bit about a lot of items;
some are specialists who have great deal of expertise in
a specific area or discipline (e.g., 18th-century
European paintings). Request a job-history résumé and a
list of references.
- Are you a member in good standing with a society
that regularly tests its members and have you been
recently and successfully tested? Societies have
different membership levels dependent upon testing and
course work.
- Do you conform to the current Uniform Standards of
Professional Appraisal Practice? USPAP was developed by
the Appraisal Foundation, a non-profit educational
organization which sets ethical and performance
standards.
- What is your fee and what other costs (e.g., travel,
research), if any, may be incurred? USPAP bars an
appraiser from charging the client a percentage of the
appraised value. Most appraisers charge an hourly or per
diem rate; the client may want to set a limit on the
amount of hours an appraiser can work before seeking
re-authorization for additional hours.
- Do you have any financial interest in the outcome of
the appraisal (e.g., act as a dealer for such items)?
- What will your appraisal report look like and can
you provide a sample report or two?
A professional appraiser should readily answer these and
any other relevant questions. Seek out additional
information about the appraiser by speaking with references
and checking with the Better Business Bureau or other
consumer affairs agencies to see if complaints have been
filed against an individual or company. Although it is not
legally necessary for short-term services such as
appraisals, it’s always a good idea to have a written
contract or a signed letter of agreement.
What should the report contain?
- A statement explaining what type of value is being
sought (e.g., market comparable value, income-generating
value, reproduction value) and how the appraisal will be
used by the item’s owner (e.g., tax liability, insurance
scheduling, property division).
- A complete description of the item.
- The date and location of the item’s inspection.
- A value for the item and its effective date.
- A statement about the appraiser’s credentials, his
or her methodology, and what resources were used to
determine value.
- A statement declaring the appraiser’s financial
disinterest (or interest)
in the item, both in the present and in the contemplated
future.
- A statement that all appropriate ethical
considerations and USPAP
standards were followed.
- The appraiser’s signature.
Every report should be fair, truthful, and unbiased about
the object and its value, regardless of the client’s wishes
or needs. Reports should be formal, typewritten, and well
organized, and should clearly answer all the client’s
questions. The report should be kept confidential unless the
appraiser receives permission to use it for another purpose
(e.g., as a sample of his or her work).
How often should I get my appraisal updated?
Every 2-3 years. That’s what many appraisers recommend
because of rapidly fluctuating market conditions.
Can a museum staff member appraise my donation?
No. Most museums don’t offer appraisal services. One reason
is the Tax Reform Act of 1984, which bars museums from
providing a donor with a value for their tax-deductible
objects. A perceived conflict of interest might arise should
a museum place a high value on an object offered for
donation; the museum could be charged with inflating an
object’s value (and therefore the donor’s tax deduction) in
order to secure the donation. Another reason is that most
museum staff are unable to keep abreast of fluctuating
market values.
If I plan to donate a valuable item to a museum, can I ask
it to pay for an appraisal?
No. If a museum were to pay for an appraisal and the
valuation was high, the museum may be seen as trying to
influence the donation, whether or not that was the case. To
keep the transaction between the donor and the museum fair
and transparent, the donor should arrange an independent
appraisal.
Can I take a tax deduction on my donation?
Yes. IRS Publication 561, Determining the Value of Donated
Property, explains how to assess values and determine when
appraisals are necessary based on the estimated value of the
object. Generally speaking, anything worth $500 or less
requires minimal documentation of value; an item valued
between $501 and $5,000 requires an explanation of how its
fair-market value was determined, which may or may not
involve the work of an appraiser; an item valued $5,001 or
more does require the use of a professional appraiser.
Anything valued over $501 must be accompanied by IRS Form
8283. Because museums are unable to keep abreast of
ever-changing tax laws, it’s important to work with a
competent tax attorney.
What happens if I find that my donation was under- or
overvalued?
It depends. Most museums have a policy that, once a donation
is made, it becomes the property of the museum. An error in
valuation is usually not enough to rescind a gift, which is
why having an appraisal made before an object is donated is
recommended. Under certain conditions penalties can be
imposed by the IRS if a charitable donation is found to have
been overvalued.
Are there any timing concerns about appraisals and
donations?
Yes. IRS regulations allow for an appraisal to take place
after the date of the donation, but before the tax return is
filed. Any donations made after an appraisal has been made
must be completed within 60 days.
CREDITS
American Society of Appraisers. “Principles of Appraisal
Practice and Code of Ethics.” January 1984.
http://www.appraisers.org/join/code_ethics.cfm (25
September 2003).
American Society of Appraisers. “Questions and Answers about
the Appraisal Profession.” Reprint SERA News, Summer 1999.
The Appraisal Foundation. 2003.
http://www.appraisalfoundation.org (25 September 2003).
DeAngelis, Ildiko P. and Lela Hersh. “Object of Appraisal:
Legal & Ethical Issues.” Museum News Sep/Oct 2001: 46-49.
Henderson Phillips Fine Arts Insurance. “What is ‘Fair
Market Value’?” [handout] April 1998.
International Society of Appraisers. “Be Certain of its
Value: A Consumer’s Guide to Hiring a Competent Personal
Property Appraiser.” 1995.
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