8.18.1  Valuation Assistance Procedures

Manual Transmittal

August 24, 2012

Purpose

(1) This transmits a complete revision of IRM 8.18.1 Valuation Assistance, Valuation Assistance Procedures.

Material Changes

(1) Changed the section title of this IRM from "Valuation Assistance Procedures – Overview" to "Valuation Assistance Procedures."

(2) Revised to reflect new organizational titles resulting from the Appeals 2012 Alignment Project.

(3) Changed "Appeals Appraisal Services" to "Art Appraisal Services" to reflect the correct title of the unit.

(4) Changed "Chief Art Appraisal Services" to "Director, Art Appraisal Services" to reflect the correct title.

(5) Changed the title "valuator(s)" to "appraiser(s)" in accordance with the employee job title.

(6) Changed "District Counsel" and "Regional Counsel" to "Area Counsel" to reflect current organizational structure and titles.

(7) Deleted the following subsections:

  1. Business and Real Estate Valuation, formerly IRM 8.18.1.1.1.

  2. Valuation Requests Involving Closely Held Securities, formerly IRM 8.18.1.2.2.

  3. Valuation Requests Involving Intangibles, etc., formerly IRM 8.18.1.2.3.

  4. Valuation Requests Involving Real Estate Investment Trusts, formerly IRM 8.18.1.2.4.

  5. Estate and Gift Tax Cases Over $10 Million, formerly IRM 8.18.1.2.1.

(8) Expert Assistance in Litigation, previously numbered IRM 8.18.1.1.2, was moved to IRM 8.18.1.13.

(9) Moved information formerly in IRM 8.18.1.2.5, Appeals Appraisal Services Follow-up Procedure, to IRM 8.18.1.8.3, Receiving Office's Procedures.

(10) Deleted the sentence "Art Appraisal Services provides staff support to the Panel and also provides valuation assistance on other art objects" from the subsection currently numbered as IRM 8.18.1.10, Commissioner’s Art Advisory Panel and Additional Assistance.

(11) Added the following sections:

Section Title Description
IRM 8.18.1.1.2 Statement of Value Overview Describes the process of requesting a Statement of Value and the procedures for these requests.
IRM 8.18.1.3 Case Assignment Outlines the procedures for the Director, Art Appraisal Services, Appraisers, and Administrative Officers for receiving cases.
IRM 8.18.1.4 Valuation Casework and Development Guidelines Instructs the appraiser to develop the case in a logical manner.
IRM 8.18.1.4.1 Identifying Critical Factors Describes the criteria of issues which must be identified to reach a conclusion.
IRM 8.18.1.5 Documentation and Time Reporting on ACDS/Art Valuation Describes the requirement that all activities must be documented.
IRM 8.18.1.5.5 Reviewing the Submitted Appraisal(s) Instructs the appraiser the actions that should be taken when reviewing submitted appraisals to determine an accurate valuation.
IRM 8.18.1.6 Valuation Determination and Resolution Guidelines Describes the expectation of early and credible resolution.
IRM 8.18.1.7 Report Guidelines Describes the requirement for appraisers in Art Appraisal Services to prepare a report and/or memorandum in response to referral requests.
IRM 8.18.1.7.1 Report Contents Describes in general what the content of reports produced by Art Appraisal Services should contain.
IRM 8.18.1.7.2 Report Format Describes in general the format that all reports should follow.
IRM 8.18.1.8 Case Closing Procedures Describes the actions to be taken when closing an appraisal review.
IRM 8.18.1.8.3 Receiving Office Procedures Describes the actions the receiving office is to perform when receiving a completed valuation report.
IRM 8.18.1.12 Art Panel Meeting Procedures Describes the actions taken to establish Art Advisory Panel meetings, item selection, and reporting meeting results.

(12) Deleted section "Valuation Requests" and combined procedures with "Art Appraisal Assistance."

(13) Corrected mailing addresses for correspondence to Art Appraisal Services.

(14) Added section regarding the selection and appointment of members to the Art Advisory Panel.

(15) Incorporated Interim Guidance, Mandatory Use of the Specialist Referral System (SRS) for Art Appraisal Services (AAS), Control No. AP-08-0612-03.

Effect on Other Documents

IRM 8.18.1 dated December 14, 2010 is superseded. Incorporated Interim Guidance, Mandatory Use of the Specialist Referral System (SRS) for Art Appraisal Services (AAS), Control No. AP-08-0612-03.

Audience

Criminal Investigation (CI), Large Business & International (LB&I), Small Business/Self-Employed (SB/SE), Tax Exempt/Government Entities (TE/GE), Wage & Investment (W&I), Chief Counsel (CC)

Effective Date

(10-01-2012)


Kirsten Wielobob
Director, Specialty Operations

8.18.1.1  (10-01-2012)
Art Appraisal Services - Overview

  1. Art Appraisal Services (AAS) provides advice and assistance to the Service, other Government agencies, and taxpayers on valuation questions arising in connection with personal property and works of art. It also assists the Office of Chief Counsel and Department of Justice (DOJ) in the development of cases involving valuation issues for trial or pretrial settlement.

  2. This material may provide assistance to the following:

    • Appeals technical employees and team managers,

    • LB&I, SBSE and TEGE employees and managers,

    • Criminal Investigation,

    • Chief Counsel,

    • Tax Division of the Department of Justice (DOJ), and

    • Taxpayers and their representatives.

  3. Requesters may contact the AAS appraisers by telephone to informally discuss a valuation to determine the type of assistance required and whether a formal written request is needed.

  4. When a formal request is appropriate, it must be written and forwarded to AAS via the Specialist Referral System.

  5. The following policies and procedures are provided for AAS personnel, other Service personnel, and other Government agencies requiring valuation assistance.

8.18.1.1.1  (10-01-2012)
Art Valuation Requests Overview

  1. AAS is available to provide appraisal service on works of art including paintings, drawings, prints, sculptures, antiques, ceramics, decorative arts, textiles, carpets, silver, rare manuscripts, antiquities, ethnographic art, collectibles, classic automobiles, and historical memorabilia. If a Service employee has a case that involves a taxpayer’s appraisal of a single work of art with a claimed value of $50,000 or more, it must be referred to AAS for review and, subject to the discretion of AAS, may also be submitted for additional review by the Commissioner’s Art Advisory Panel. Submit requests for assistance in art valuation matters via the Specialist Referral System, https://srs.web.irs.gov. Upon notification of assignment to an appraiser, send a copy of the referral with the supporting documents and Form 3210, Document Transmittal, via UPS Ground to:
    Internal Revenue Service/Appeals
    AP:SO:ART
    1111 Constitution Ave, NW, Suite 700
    Washington, DC 20224-0002

  2. AAS is also available to provide assistance in determining the fair market value of many objects of art that have return values of less than $50,000. For these items AAS is available to provide telephone assistance. Please submit a consultation request via the Specialist Referral System: https://srs.web.irs.gov/. Before contacting AAS, the requester should ascertain as many as possible of the following facts necessary for determining the item’s fair market value:

    1. Name of artist,

    2. Description of item (title, medium, size, date created, and any distinguishable marks, symbols or labels),

    3. Date acquired by taxpayer(s),

    4. Cost of acquisition,

    5. Valuation date, and

    6. Claimed fair market value.

  3. Art Appraisal Services will recommend values, identify strengths and weaknesses in both the government’s and taxpayer’s expert report or position, and provide any other assistance that will help resolve the valuation issues.

8.18.1.1.1.1  (10-01-2012)
Art Valuation Request Requirements

  1. Requests for valuation assistance on works of art should include a complete description of the item:

    1. Name of artist (sculptor, maker, etc.), culture, or place of origin,

    2. Title or subject matter,

    3. Date created or age,

    4. Medium and support (e.g., oil on canvas, watercolor on paper, etc.),

    5. Size (cite actual dimensions), or weight, if applicable, for objects made from silver, gold, or other precious materials, and

    6. Signatures, marks, distinguishing features, symbols, or labels on the back or front of the object.

  2. In addition, include the following information and items necessary for determining the fair market value of each object:

    1. The original appraisal filed with the return and the claimed value(s) for each work and the whole,

    2. A professional quality 8 by 10 inch color photograph, 4 by 5 inch color transparency, or high resolution digital image of the object (which the donor, donee, appraiser, or executor of the estate may already have),

    3. Manner of acquisition, cost, and date,

    4. History (provenance) of the item (meaning who has owned the item),

    5. Any reference source citing the item(s), including standard publications (e.g., the catalogue raisonne, news article, or in a museum exhibition catalogue),

    6. A record of exhibitions in which the work of art was displayed,

    7. A Condition Report by a professional conservator if the physical state of an item affects its claimed value,

    8. Sales of other comparable works of art sold by the artist, including date of sale and price paid,

    9. The present location of the art object(s), if it becomes necessary to arrange an inspection, and

    10. Other information deemed to be relevant to the specific property being valued.

  3. Any pertinent factors or knowledge gathered as to the accuracy of the claimed value should be set out on a separate page in the request.

  4. While the items listed above represent the ideal information required for valuation determinations by AAS, it is understood that not all of them may be readily available in every case. However, the validity of the value determinations and receiving timely recommendations from AAS are greatly enhanced and facilitated by complete and accurate information on each object of art to be reviewed.

8.18.1.1.2  (10-01-2012)
Statement of Value Overview

  1. Taxpayers may request an advance valuation of art from the Internal Revenue Service, also known as a Statement of Value (SOV). An SOV may be used to substantiate the value of art prior to filing an income, estate, or gift tax return that reports the transfer of art. This procedure is addressed in Rev. Proc. 96-15.

  2. The Service may decline to issue an SOV when appropriate in the interest of efficient tax administration.

8.18.1.1.2.1  (10-01-2012)
Statement of Value Request Requirements

  1. SOV requests must be mailed to:
    Internal Revenue Service/Appeals
    Request for Statement of Value
    Attention: Art Appraisal Services (AP:SO:ART)
    P.O. Box 27720
    McPherson Station
    Washington, DC 20038

  2. The SOV request must satisfy or contain the following for the appraiser to proceed:

    1. Be in writing,

    2. An original qualified appraisal of the item(s),

    3. A completed appraisal summary (Section B of Form 8283, Noncash Charitable Contribution, for noncash charitable contributions),

    4. At least one of the following: a professional quality photograph of a size and quality fully showing the item, preferably an 8 x 10 inch color photograph, a color transparency not smaller than 4 x 5 inches, or high resolution digital image or Disk, and

    5. The location of the Field Area Office that has or will have examination jurisdiction over the tax return (not the Service Center where the return is filed).

  3. A taxpayer may withdraw the request for an SOV at any time before it is issued by the Service. When a request is withdrawn, the Director, AAS will notify the appropriate Director.

  4. If a request for an SOV for an item of art lacks information essential for its issuance, the Service will notify the taxpayer that the request will not be processed for that item unless the Service receives the missing information within 30 calendar days after the date of such notification.

  5. An SOV should be completed and issued in the following time periods:

    1. When a completed SOV request is received after January 15 but on or before July 15, the SOV should be issued by December 31.

      Example:

      A completed SOV request is received May 20, 2012; the SOV should be issued by no later than December 31, 2012.

    2. When a completed SOV request is received after July 15 but on or before January 15, the SOV should be issued by June 30.

      Example:

      A completed SOV request is received September 10, 2012; the SOV should be issued by June 30, 2013.

  6. If the value reported on the taxpayer’s appraisal is appropriate, the AAS appraiser will prepare an SOV approving the submitted appraisal.

  7. If the value reported on the taxpayer’s appraisal is not deemed appropriate, the AAS appraiser will prepare an SOV with the Service’s determination of value, and the basis for its disagreement with the taxpayer’s appraisal.

8.18.1.1.2.2  (10-01-2012)
Statement of Value Processing

  1. The Director, AAS or designee will review all Statements of Value.

  2. When an SOV is completed and approved for a tax return involving an income tax charitable contribution, the AAS administrative officer will:

    1. Forward the original SOV memorandum to the taxpayer, and

    2. Forward a copy of the SOV with Form 5346, Examination Information Report, and Form 8256, Art Valuation, to LB&I, PSP in Ogden, Utah.

  3. When an SOV is completed and approved for an Estate or Gift Tax return, the AAS administrative officer will:

    1. Forward the original SOV memorandum to the taxpayer, and

    2. Forward a copy of the SOV with Form 5346, Examination Information Report, and Form 8256, Art Valuation, to SBSE, Specialty, Estate & Gift Tax Chief.

8.18.1.2  (10-01-2012)
Appraisers Overview

  1. This section provides guidelines applicable to Art Appraisers (appraiser) that are engaged in valuation practice relating to the development, resolution, and reporting of issues involving works of art and other tangible personal property. Within these guidelines, the term "personal property" refers to tangible personal property. Appraisers must reasonably justify any departure from these guidelines.

  2. Personal property includes but is not limited to paintings, watercolors, prints, drawings, sculpture, ceramics, furniture, decorative arts, antiques, textiles, carpets, silver, rare manuscripts, historical memorabilia, antiquities, ethnographic art, collectibles, and classic automobiles. The guidelines provided here regarding identifying, documenting, and analyzing the property are applicable to all types of personal property.

  3. This document incorporates by reference the ethical and conduct provisions contained in the Office of Government Ethics (OGE) Standards of Ethical Conduct, applicable to all IRS employees.

  4. Valuation of assets owned and/or transferred by or between controlled taxpayers (within the meaning of Treasury Regulation section 1.482–1(i) (5)) may present substantive issues that are not addressed in these guidelines.

8.18.1.3  (10-01-2012)
Case Assignment

  1. The following procedures describe the actions that should be taken by the administrative officer, appraisers, and Director, AAS when cases are referred to AAS for assistance.

8.18.1.3.1  (10-01-2012)
AAS Administrative Officer's Actions and Timeframes

  1. The AAS administrative officer will receive all cases by:

    Step Action
    1 Check mail deliveries each day.
    2 Confirm that the case(s) and other identified item(s) indicated on the sender’s Form 3210 are present.
    • If the case(s) and other identified item(s) are not present, contact the sender to confirm the missing case(s) or item(s).

    • Note the missing case(s), item(s), and contact date; initial the Form 3210.

    3 After confirming the contents listed on Form 3210:
    • Sign and file Form 3210 in the Form 3210 binder.

  2. The administrative officer will complete the following actions and/or enter the following information, as relevant, on ACDS/Art Valuation:

    1. Create the case by generating a system assignment number through ACDS/Art Valuation,

    2. The taxpayer’s name,

    3. The taxpayer’s Social Security Number or Employer Identification Number (EIN),

    4. Docket number (if present),

    5. The number of items,

    6. User fee submitted (for a Statement of Value request),

    7. Earliest tax period,

    8. Earliest statute of limitations expiration date,

    9. Referral date (date located on referral or, if referral document is not present, the date of issuance of the Form 3210),

    10. Appeals receipt date,

    11. The taxpayer’s total claimed value of the items under review,

    12. The requesting entity (SB, LB, TE, W&I, CCl, CI, DOJ, TP),

    13. The requester’s name,

    14. The requester’s phone and fax numbers,

    15. The requester’s street address,

    16. The requester’s email address (if available), and

    17. The appraiser and professional affiliation.

  3. The case file and its contents are then submitted to the Director, AAS for review.

8.18.1.3.2  (10-01-2012)
Director, AAS' Actions and Timeframes

  1. The Director, AAS or designee will review the incoming case file to:

    1. Ensure that all pertinent information and documentation is present, and

    2. Review the Statute of Limitations on the case.

      Note:

      If the statute will expire within 180 days of receipt, the employee will take the actions described in IRM 8.18.1.5.3, Cases Requiring Special Handling.

  2. Upon receipt of a case, the Director, AAS or designee will issue an acknowledgement notice to the referring office if this was not done via SRS. The acknowledgement notice (this may be completed via email or fax) will include:

    1. The name of the appraiser assigned the case,

    2. The time frame in which the receiving appraiser will contact the referring employee, and

    3. If appropriate, the Panel meeting number and date that the item(s) will be presented (if known).

  3. If not all necessary information and/or documentation is present, the Director or designee will determine whether the case should be assigned to an appraiser, or:

    1. Make contact with the referring employee for the additional information, and/or

    2. Return the case to the referring employee’s office for further development.

  4. Cases should be assigned to an appraiser within 5 business days of receipt by the Director or designee.

  5. The Director, AAS or designee will determine and enter in ACDS/Art Valuation:

    1. Whether the case is an Initial Submission, Reconsideration, or Statement of Value,

    2. Whether it is a staff review,

    3. The type of items involved (i.e., Decorative Art, Fine Art, or Other),

    4. The type of tax involved (i.e., Estate, Gift, or income),

    5. Earliest tax period,

    6. The appraiser assigned the case, and

    7. The Panel meeting assigned (tentative).

  6. When a case is transferred within the AAS unit from one appraiser to another, the Director, AAS or designee will document the transfer in the notes section of the case summary card on ACDS/Art Valuation.

8.18.1.3.3  (10-01-2012)
Appraiser’s Actions and Timeframes

  1. The following procedures describe initial actions that should be performed by appraisers when receiving and beginning casework.

8.18.1.3.3.1  (10-01-2012)
Receipt and Acknowledgement Procedures

  1. Upon receipt of the case the appraiser will:

    1. Confirm whether it is assigned to that appraiser on ACDS/Art Valuation. If not, the appraiser will inform the Director, AAS for case assignment or other appropriate action.

    2. Ensure that all pertinent fields on ACDS/Art Valuation are completed. If not, make note of the necessary information and submit it to the administrative officer for input.

    3. Review the case file to ensure that all needed information and/or documents are present to proceed with the appraisal review.

    4. Document in the case activity record on ACDS/Art Valuation the date the appraiser received the case.

    5. Within thirty (30) calendar days, the appraiser will inform the referring employee that he/she has been assigned the case and establish a follow-up schedule.

  2. If not all needed information and/or documents are present, the appraiser will:

    1. Contact the referring employee for the additional information, and

    2. If contact cannot be made with the referring employee, the appraiser will inform the Director, AAS of the missing information and/or documents and consider returning the case to the referring employee for further development.

  3. The appraiser will confirm the following fields are correct on ACDS/Art Valuation:

    1. Control number,

    2. Case – Name of taxpayer,

    3. Social security number or EIN,

    4. TY- Prop – Type of property,

    5. #-Items – The number of items to be reviewed,

    6. TX-Per – Tax period involved (oldest),

    7. Referral – DT – Date referral was completed and signed,

    8. Rec-DT – Date of case receipt,

    9. TP-Value – The taxpayer’s submitted total appraised value of the items being reviewed,

    10. Val-DT – The valuation date,

    11. AAS Appraiser– Name of the appraiser assigned the case,

    12. ASGN-DT – Date case assigned to the appraiser,

    13. REQ-Org – The name of the Service organization requesting assistance,

    14. Name – The name of the requesting employee, and

    15. Phone – Phone number of the requesting employee.

8.18.1.3.3.2  (10-01-2012)
Initial Analysis

  1. The appraiser will perform an initial case analysis within thirty (30) calendar days of receipt, including:

    1. Noting the number of items to be reviewed,

    2. For a charitable contribution, ensure that an appropriately completed Form 8283 is included,

    3. Ensure that a qualified appraisal is included, and

    4. Review the Statute of Limitations on the case. If the statute will expire within 180 days the employee will take the actions described below within IRM 8.18.1.5.3, Cases Requiring Special Handling.

  2. The initial analysis will be documented in the case activity record in ACDS/Art Valuation.

  3. After completing the initial analysis, the appraiser will plan the appraisal review assignment.

8.18.1.4  (10-01-2012)
Valuation Casework and Development Guidelines

  1. Successful completion of an appraisal review assignment includes planning, identifying critical factors, documenting specific information, and analyzing the relevant information. All relevant activities will be documented in ACDS/Art Valuation.

8.18.1.4.1  (10-01-2012)
Identifying Critical Factors

  1. To determine an appraisal review conclusion, appraisers should define the assignment and determine the scope of work necessary by identifying the following:

    1. Property to be valued,

    2. Interest to be valued, which may include fractional interest or personal property held in partnerships, corporations, and trusts,

    3. Effective valuation date,

    4. Purpose of appraisal,

    5. User of appraisal,

    6. Claimed value,

    7. Standard and definition of the value, i.e., is it fair market value?

    8. Assumptions,

    9. Limiting conditions,

    10. Scope limitations,

    11. Restrictions, agreements, and any other factors that may influence value, and

    12. Sources of information.

  2. The taxpayer's personal property appraisals should include, where applicable:

    1. Claimed value,

    2. A complete description of the item,

    3. A professional quality 8 by 10 inch color photograph, a 4 by 5 inch color transparency, or high resolution digital image of the object (which the donor, donee, appraiser, or executor of the estate may already have),

    4. Cost, date, and manner of acquisition,

    5. History (provenance) of the item (meaning who has owned the item),

    6. Any reference source citing the item(s), including standard publications (e.g. the catalogue raisonne, news article, or museum exhibition catalogue),

    7. A record of exhibitions in which the work of art was displayed,

    8. Sales of other comparable works of art sold by the artist, including date of sale and price paid,

    9. The present location of the art object(s), if it becomes necessary to arrange an inspection,

    10. A condition report by a professional conservator, if the physical state of an item affects its claimed value, and

    11. Other information deemed relevant to the specific property being valued.

  3. A complete description of the item will include:

    1. Name of artist (sculptor, maker, etc.), culture, or place of origin,

    2. Title or subject matter,

    3. Date created or age,

    4. Medium and support (e.g., oil on canvas, watercolor on paper, etc.),

    5. Size (cite actual dimensions), or weight, if applicable, for objects made from silver, gold, or other precious materials, and

    6. Signatures, marks, distinguishing features, symbols, or labels on the back or front of the object.

  4. The following should be obtained for all property:

    1. The effective valuation date,

    2. The cost, date, and manner of acquisition,

    3. The appraised fair market value,

    4. The date (or dates) on which the property was appraised,

    5. Information about any agreements or understandings entered into (or expected to be entered into) that relates to the use, sale or other disposition of the property, including, for example, sales of the property since the valuation date,

    6. The economic outlook of the market in general and the outlook of the specific property in particular,

    7. Condition of each object, especially as it affects the value of the work, and

    8. Such other factors which, in the opinion of the appraiser, are appropriate for consideration.

8.18.1.5  (10-01-2012)
Documentation and Time Reporting on ACDS/Art Valuation

  1. The following procedures describe how appraisers should document casework and report time on the ACDS/Art Valuation system.

8.18.1.5.1  (10-01-2012)
Documenting Case Activity

  1. All case activity should be clearly documented in the notes section of the Case Activity Record (CAR) on ACDS/Arts Valuation.

  2. Documentation includes but is not limited to recording the steps taken, techniques used, and information found to support the facts and conclusions in the final report.

  3. Appraisers will maintain a detailed CAR which:

    • Identifies actions taken and indicates time charged,

    • Identifies contacts, including name, subject, commitments, etc., and

    • Documents delays in the valuation.

  4. Documentation should describe the actions taken. For example, "Research" is not a sufficient entry. An appropriate entry should include the type of research performed, the resources used, and other helpful information. For example, "Researched multiple databases including Artnet, Artfact, Artprice, and found multiple comparables for the (description of item being researched) and determined that the claimed value is acceptable."

  5. Always use CARATS codes to indicate the type of case activity performed. The following CARATS codes are currently available on ACDS/Art Valuation:

    • AC – Final report submitted to Director, AAS

    • AN – Analysis

    • CF – Conference

    • CM – Final report preparation

    • CO – Correspondence

    • CR – Case received

    • MS – Miscellaneous

    • SW – Support work

    • TC – Telephone contact

  6. All case documentation and time spent on the case should have a corresponding CARATS code.

  7. The CAR and supporting documentation should justify that the time spent is commensurate with work performed.

  8. When developing an appraisal conclusion, appraisers should obtain the relevant information necessary to accomplish the assignment and include the information within the documentation of the case.

8.18.1.5.2  (10-01-2012)
Time Reporting

  1. Time reporting should be input to ACDS/Art Valuation contemporaneously with the action.

  2. Report time in increments of one (1) hour.

  3. If an Appraiser will be on scheduled leave, (s)he should input all time for the period up to and including the time of leave.

8.18.1.5.3  (10-01-2012)
Cases Requiring Special Handling

  1. Cases with statutes of limitations expiring within 180 days require special handling.

  2. If the case is received and the statute of limitations will expire within 180 days, consider returning the case to the referring office.

  3. If at any time during the appraisal review, the appraiser or the Director, AAS determines that the statute of limitations will expire within 180 days, the appraiser will:

    1. Place the case in a red folder and mark the statute expiration date on the upper right corner of the case folder in BOLD ink.

    2. IMMEDIATELY inform the Director, AAS that the statute will expire within 180 days or is in jeopardy.

    3. Contact the referring employee to establish a plan of action.

    4. If the Art Advisory Panel has not considered the art work in the case and the statute will expire within 60 days after the next meeting, advise their manager, make the best determination possible, close the case, and immediately forward the closed case report to the referring employee.

8.18.1.5.4  (10-01-2012)
Appraisal Analysis

  1. Appraisers should document their analysis in the notes section of the Case Activity Record on ACDS/Art Valuation.

  2. In developing an appraisal review conclusion, appraisers should analyze the relevant information necessary to accomplish the assignment.

  3. Appraisers should consider all factors that affect the value.

  4. Appraisers should use a market valuation approach to determine the value of an item or items and use professional judgment in determining the extent of research necessary to substantiate the fair market value. The appraiser should consider:

    1. The specific basis for the appraisal, such as relevant public and/or private sales (ideally with complete descriptions and illustrations), particularly around the valuation date with an analysis of these specific sales and relevance to the item being valued. The appraisal should also include the method of valuation used.

    2. The market conditions near the valuation date.

    3. The market demand for the subject property and the importance of the property and its relationship to its relevant artist/type/group etc.

    4. The effect of condition and restorations, style, quality, medium, artist or culture, provenance, rarity.

    5. The effect of relevant contractual or legal restrictions.

    6. Any additional information or special circumstances that may affect the fair market value of the property.

    Note:

    While the foregoing items represent the ideal information required, it is understood that each item of information will not be readily available in every case and the appraiser should not unnecessarily delay case activity.

8.18.1.5.5  (10-01-2012)
Reviewing the Submitted Appraisal(s)

  1. The appraiser should first determine whether the submitted appraisal is a qualified appraisal.

  2. In reviewing a personal property appraisal and reporting the results of that review, an appraiser should assess the adequacy and appropriateness of the appraisal report and clearly disclose the scope of work of the review process.

  3. In reviewing a personal property appraisal, an appraiser should:

    1. Identify the taxpayer and intended users of the opinions and conclusions, and the purpose of the review assignment.

    2. Identify the report under review, the property interest being valued, the effective date of the valuation, and the date of the review.

    3. Identify the scope of the review process.

    4. Determine the completeness of the report under review.

    5. Determine the adequacy and relevance of the data, and the propriety of any adjustments to the data.

    6. Determine the appropriateness of the comparables and/or valuation methods and techniques used; develop the reasons for any disagreement.

    7. Determine whether the analyses, opinions, and conclusions in the report under review are appropriate and reasonable, and substantiate any disagreement.

  4. In the event of a disagreement with the report’s factual representations, underlying assumptions, methodology, or conclusions, an appraiser should conduct additional fact-finding, research, and/or analyses necessary to arrive at an appropriate value for the property.

8.18.1.6  (10-01-2012)
Valuation Determination and Resolution Guidelines

  1. Appraisers will make necessary efforts to resolve the case after fully considering all relevant facts.

  2. The objective is to resolve the issue as early in the examination as possible. Credible and compelling work by the appraiser will facilitate resolution of issues without litigation.

  3. The appraiser will work with the referring employee and taxpayer (when warranted) to resolve all outstanding issues regarding the value of the personal property.

  4. Once the appraiser has all the pertinent information to resolve the issue, the appraiser will use his/her professional judgment in considering this information to make a specific value determination.

  5. Appraisers may not have all of the information they would like to definitively resolve an issue. Appraisers, therefore, should decide when substantially enough information is available to make a proper determination.

  6. Appraisers should use appropriate resources to obtain the information necessary to assess a proper determination. These resources may include and not be limited to information data bases, text materials, experts in the various fields of property being examined, etc.

  7. Appraisers will employ independent and objective judgment in reaching determinations, and will decide all matters on their merits, free from bias, advocacy, and conflicts of interest.

8.18.1.7  (10-01-2012)
Report Guidelines

  1. Appraisers will prepare reports and/or memoranda of their findings.

  2. The primary objective of a valuation report is to provide accurate information to support the conclusions.

  3. Valuation reports should contain pertinent information necessary to enable a clear understanding of the valuation analyses and demonstrate how the conclusions were reached.

  4. This section requires the specific information to include or address in each report or memorandum.

8.18.1.7.1  (10-01-2012)
Report Contents

  1. The extent and content of the report depends on the needs of each case.

    Example:

    If the total claimed value is supportable, issue a memorandum so stating to the referring employee.

  2. Valuation reports should clearly communicate the results and identify the information relied upon in the valuation process. The report should effectively communicate the methodology and reasoning, as well as identify the supporting documentation.

  3. Subject to the type of report, valuation reports should generally contain sufficient information relating to the items in Identifying Critical Factors, Documenting, and Analyzing above, to ensure consistency and quality.

  4. Reports written with respect to reviewing shall contain, at a minimum, information relating to those items in Identifying Critical Factors and Analyzing necessary to support the assumptions, analyses, and/or determinations of the appraiser.

  5. Each written valuation report should contain a signed statement that is similar in content to the following: To the best of my knowledge and belief:

    • The statements of fact contained in this report are true and correct.

    • The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions.

    • I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest with respect to the parties involved.

    • I have no bias with respect to the subject of this report or to the parties involved with this assignment.

    • I have (or have not) made a personal inspection of the property that is the subject of this report.

    • My compensation is not contingent on an action or event resulting from the analyses, opinions or conclusions in, or the use of, this report.

    • My analyses, opinions and determinations were developed, and this report has been prepared in conformity with the applicable Internal Revenue Service, Art Valuation Guidelines.

    • My engagement in this assignment was not contingent upon delivering or reporting predetermined results.

8.18.1.7.2  (10-01-2012)
Report Format

  1. All appraisal reviews will be prepared in the following format:

    Valuation Report Section Description
    I. Purpose Describes the purpose of the document, e.g., whether it is a Statement of Value or Appraisal Review. It should also include the claimed value, number of items, and valuation date.
    II. Intended Use and User(s) Identifies the intended user and use of the document.

    Example:

    The intended users of this report are the taxpayer, the taxpayer's representative, and the IRS Estate and Gift Tax office in New York, NY. The report is intended to be used in association with the estate tax return examination of the Estate of (taxpayer name).

    III. Summary and Recommendation Summarizes the findings and recommended action, e.g., increase or decrease in value of the items reviewed.
    IV. Background Documents the taxpayer’s actions, e.g., documents submitted, number of items submitted for review, and other pertinent factors.
    V. Scope of Work and Analysis Documents the work performed, e.g., basis of recommendation, comparables used, sales data, whether the Art Advisory Panel reviewed the item, etc. It should also contain a comparative table. In a table or column format, identify the items which have been reviewed, the claimed value, and the IRS determined value. This is only for items with adjusted values. Do not list any agreed items.
    VI. Certification Statement This statement certifies that the review and recommendation(s) were completed without bias of any sort.
    VII. Approved by Identifies who has approved the report by signature. Normally this will be the Director, AAS or designee.
    VIII. Prepared by Identifies the AAS appraiser who prepared the report.

8.18.1.8  (10-01-2012)
Case Closing Procedures

  1. The following subsections describe the case closing procedures for the appraiser, administrative officer, and receiving office.

8.18.1.8.1  (10-01-2012)
Appraiser’s Closing Procedures

  1. The appraiser will complete the following actions before submitting cases for closure:

    Step Action
    1) Complete Part I of Form 8256 (Art Valuation) for all requests from Service personnel on cases referred to AAS. Include Form 8256 in the closed case.
    2) Prepare the closing report and/or memorandum for review and approval by the Director, AAS or designee.
    3) Document a brief summary of findings in the notes section of the case activity record on ACDS/Art Valuation. The summary can be in either narrative or outline format.
    4) Update ACDS with activity code AC - Submitted to Director, AAS and status code "D" .

  2. Forward the case file with all pertinent documents to the Director, AAS for review and closing actions. When a report and/or memorandum has been prepared it will be reviewed to ensure all pertinent issues have been addressed and documented appropriately.

    1. If the review of the case justifies closure it will be forwarded to the administrative officer for closure actions on ACDS/Art Valuation.

    2. If the review of the case indicates that additional activities are necessary for closure, the Director AAS will provide a clear explanation of the necessary actions.

8.18.1.8.2  (10-01-2012)
Administrative Officer’s Closing Procedures

  1. Upon receipt of the approved case file, the administrative officer will:

    1. Make two copies of the appraiser’s report, if included, one copy of the transmittal memorandum to referring employee, and one copy of Form 8256, Art Valuation,

    2. Prepare Form 3210, and send with original and one copy of any appraisal report, original memorandum, and Form 8256 to referring employee,

    3. Update ACDS/Art Valuation to reflect the closed case, the IRS value determination, and the date that the Form 8256 was sent to the referring employee,

    4. File the originator’s copy of Form 3210 in the 3210 binder; and

    5. Compile the case folder ensuring all documentation is secure and file with closed cases.

  2. The administrative officer should follow up to ensure that the acknowledgement copy (Part 3) of Form 3210 is returned for filing as required by IRM 10.2.13.

  3. The administrative officer should confirm receipt of the returned Forms 8256.

    1. The administrative officer will establish a method to account for the Forms 8256 sent and returned.

    2. On at least a quarterly basis the administrative officer will determine whether Forms 8256 are being returned and follow up as needed.

8.18.1.8.3  (10-01-2012)
Receiving Office's Closing Procedures

  1. The manager of any Service employee who has received assistance from AAS will ensure that Form 8256, Art Valuation, is updated by completing the applicable portions of Part II immediately upon disposition of the case.

  2. The updated original Form 8256 with Art Appraisal Services closing memorandum report will remain in the case workpaper file after being indexed on Examination Workpapers Form 4318 or Estate and Gift Tax exam planning documents and/or lead sheets and workpapers. Mail a copy of the updated Form 8256 to:
    Internal Revenue Service/Appeals
    Attn: Director, AAS (AP:SO:ART)
    1111 Constitution Ave, Suite 700
    Washington, DC 20224

  3. To further enhance the valuation assistance provided by AAS, requesters are encouraged to include comments and supporting documentation that would be beneficial to the viability of this program.

8.18.1.9  (10-01-2012)
Reconsideration and Dispute Procedures

  1. If a taxpayer or representative does not agree with the determination of AAS, the taxpayer may request an Appraisal Reconsideration. The taxpayer is limited to no more than two reconsiderations (one while the return is being examined).

  2. If the taxpayer chooses to request reconsideration, it must be filed within 45 calendar days of receipt of the Appraiser’s report or Examiner’s decision, whichever is earliest.

  3. The taxpayer’s request for reconsideration must:

    • Be in writing, and

    • Include substantial evidence which will affect the valuation of the item(s).

      Example:

      If the taxpayer asserts that condition issues affect the item's value, the request must include a condition report by a professional conservator.

  4. If both criteria are met, the Director, AAS or designee will assign the reconsideration to an appraiser through ACDS/Art Valuation as a new case.

  5. If the criteria above are not met, the taxpayer’s request for reconsideration will be returned.

    • The Director, AAS or designee should contact the examiner or taxpayer (which ever is appropriate) to request the necessary information before returning the request.

    • If the taxpayer does not supply the necessary information within 14 calendar days the Director, AAS will determine whether to return the request.

    • If deemed appropriate for return, the Director, AAS or designee will return the reconsideration request to the examiner and/or taxpayer with an explanation for its return.

8.18.1.10  (10-01-2012)
Commissioner’s Art Advisory Panel and Additional Assistance

  1. The Commissioner maintains an Art Advisory Panel (the Panel) of nationally prominent art museum directors, curators, and art dealers to help the Service review and evaluate appraisals submitted by taxpayers in support of the fair market value claimed for works of art on income, estate, and gift tax returns.

  2. The Panel is an IRS Advisory Committee chartered under the Federal Advisory Committee Act of 1972. Members are appointed without compensation.

  3. The Art Advisory Panel generally meets three to four times per year as follows:

    1. Section 1, Painting and Sculpture – Spring (March/April) and Fall (September/October); and

    2. Section 2, Decorative Arts and Antiques – Once or twice a year (May/June and/or November/December).

  4. The Panel may question the taxpayer’s claimed value by substantiating and recommending a specific valuation. Such recommendations are submitted to AAS and may become the position of the IRS. Later, if agreement is not secured with a taxpayer, employees may contact AAS to get additional information and valuation data in support of the Service’s determined value. This is accomplished by requesting a reconsideration of the values through the SRS. (See IRM 8.18.1.9, Reconsideration and Dispute Procedures.)

8.18.1.10.1  (10-01-2012)
Appointment of Experts to the Art Advisory Panel of the Commissioner

  1. The procedures for appointing experts for the Art Advisory Panel of the Commissioner are outlined in IRM 6.304.1 to ensure timely submission of approval requests to Treasury; and to ensure adherence to regulations, policies, and procedures (such as the Federal Advisory Committee Act of 1972) governing the appointment of Experts and Consultants.

8.18.1.10.2  (10-01-2012)
Renewal of the Art Advisory Panel

  1. The Art Advisory Panel Charter is renewed every two years by request from the Commissioner of Internal Revenue to the Treasury Assistant Secretary for Management and Chief Financial Officer.

  2. Procedures for requesting the approval of the Treasury Assistant Secretary for Management and Chief Financial Officer to renew the Art Advisory panel are as follows:

    Step Action
    1) The Director, AAS prepares a memorandum from the Commissioner of Internal Revenue requesting that the Treasury Assistant Secretary for Management and Chief Financial Officer approve renewal of the Panel's Charter.
    2) The IRS Commissioner must sign the memorandum.
    3) Attach the following items to the memorandum:
    • Information about the Art Advisory Panel,

    • A copy of the current charter,

    • The Federal Register notice, which notifies the public of the necessity to renew the Art Advisory Panel, and

    • The new charter.

    4) After preparing the documents in steps 1 and 3, forward to the Office of Chief Counsel, General Legal Services (GLS) for review. Include Form 14074, Action Routing Sheet.
    5) After review by GLS, forward all documents to Chief, Appeals for review. Include Form 14074, Action Routing Sheet.
    6) After review and approval by Chief, Appeals, forward all documents to the IRS Commissioner’s Office for final signature on the new charter.
    7) Once signed by the IRS Commissioner, forward the original and four copies to the Federal Register Liaison in the Office of Chief Counsel.

    Note:

    In addition, maintain one copy within AAS; send electronic file to Treasury for posting on the Federal Advisory Committee Act (FACA) database at www.facadatabase.gov.

8.18.1.11  (10-01-2012)
Art Appraisal Services and Art Advisory Panel Coordination

  1. An AAS appraiser will review the complete referral file (request for valuation assistance with the essential information and material identified above) and conduct additional research as needed before referral to the Art Advisory Panel or an outside appraiser.

  2. The Panel usually meets twice per year for each specialty area: Paintings/Sculpture and Decorative arts/Antiques. Notice of these closed meetings must be published in the Federal Register at least fifteen (15) days prior to each meeting date. Accordingly, requests for valuation assistance should be initiated as early as possible in the examination of returns involving works of art to allow sufficient time for AAS review procedures (by January 15 for Spring meeting(s) and July 15 for Fall meeting(s)).

    Note:

    Under Delegation Order 193, as revised, the Chief, Appeals is authorized to sign on the Commissioner’s behalf the notice in the Federal Register of such meeting(s).

  3. To help in case planning and control, the AAS appraiser will advise the referring employee of estimated completion dates based on Panel meeting dates, especially when facts and circumstances in specific cases result in abnormal delays.

  4. In the final disposition of a case by AAS, determinations for acceptance or rejection of claimed values will be based on the Panel’s recommendations and the AAS appraiser’s research.

  5. Due to the unique nature of the subject matter reviewed by the Panel, Appeals Officers, Estate and Gift Attorneys, Examiners, and other IRS personnel contemplating substantial concessions to values recommended by the Panel should first consult with the Director, AAS.

  6. Information regarding the status of specific cases referred for art valuation assistance may be obtained by contacting AAS.

8.18.1.12  (10-01-2012)
Art Panel Meeting Procedures

  1. When AAS determines their expertise is necessary in valuing items, AAS will meet and confer with the Commissioner's Art Advisory Panel. This meeting should be held face to face, and closed to the public.

  2. Not all cases or items require Art Advisory Panel review. Based upon the following criteria and the judgment of the Director, AAS, an item(s) may be presented to the Art Panel for additional review.

    If ... Then ...
    The item(s) is(are) within the Art Panel’s field of expertise and/or information (comparables) is not readily available It should be presented to the Art Panel
    The item(s) is part of a case requiring special handling It should be presented to the Art Panel
    The aggregate adjusted value of the case is de minimis but an item(s) is not Only item(s) of significant adjusted value should be presented to the Art Panel
    The claimed value of the item is greater than $150,000 It should be presented to the Art Panel
    A full appraisal review report is not warranted It should not be presented to the Art Panel
    The item(s) is not within the Art Panel’s field of expertise It should not be presented to the Art Panel
    The adjusted value of the item(s) is de minimis It should not be presented to the Art Panel
    The statute of limitations will expire within sixty (60) days after the next appropriate Art Panel meeting It should not be presented to the Art Panel
    It is being presented for reconsideration It may be presented to the Art Panel

8.18.1.12.1  (10-01-2012)
Establishment of Meeting

  1. Panel meetings should be established when necessary and the expense is justifiable.

  2. The Director, AAS will determine whether a meeting should not be convened.

8.18.1.12.2  (10-01-2012)
Establishing the Meeting Date

  1. Panel members should be notified of a pending meeting at least ninety (90) days before the Panel meeting.

  2. Materials for review by the Panel should be forwarded to the panel members at least thirty (30) days before the Panel meeting.

8.18.1.12.3  (10-01-2012)
Federal Register Notice

  1. A notice of the closed meeting(s) must be published no less than 15 days prior to each meeting.

  2. The Director, AAS will prepare and forward the notice to GLS for review.

  3. After GLS' review, submit the notice for signature to either the Chief or Deputy Chief, Appeals. Include Form 14074, Action Routing Sheet.

  4. Forward the approved notice and four copies to the Federal Register Liaison in the Office of Chief Counsel.

8.18.1.12.4  (10-01-2012)
Meeting Reports to Congress and the Public

  1. On a fiscal year (ending September 30) basis, the findings of the Panel meetings are to be posted to the Federal Advisory Committee Act site at www.facadatabase.gov by the Designated Federal Officer (DFO), normally the Director, AAS. This is to be completed no later than December 31 of each year.

  2. On a fiscal year (ending September 30) basis, the DFO prepares the "IRS Commissioner’s Art Advisory Panel Report to Congress" . This is to be completed no later than December 31 of each year.

8.18.1.12.5  (10-01-2012)
IRS Commissioner’s Art Advisory Panel Report to Congress Preparation and Dissemination Process

  1. The following steps describe the process for preparation and dissemination of the IRS Commissioner’s Art Advisory Panel Report to Congress:

    Step Action
    1) Compile all data necessary for the report, such as number of reviews performed, total adjustments, number of meetings held, etc.
    2) Prepare the Federal Notice Register for the report.
    3) Prepare the IRS Commissioner’s Memorandum.
    4) Prepare the IRS Commissioner’s Report to Congress.
    5) After preparing documents in 1 to 4 above, forward to GLS for review. Include Form 14074, Action Routing Sheet.
    6) After GLS' review, forward all documents to Chief, Appeals for review and signature of the Federal Register notice. Include Form 14074, Action Routing Sheet.
    7) After review and approval by Chief, Appeals forward all documents to the Commissioner’s Office for final signature on the Commissioner’s memorandum, which indicates approval of the Commissioner’s Report to Congress.
    8) After the Commissioner signs the transmittal memorandum for the Annual Report, forward the memorandum and the annual report to Treasury. Forward the original and four copies of the Federal Register notice to the Federal Register Liaison in the Office of Chief Counsel.

    Note:

    In addition, maintain one copy within AAS; post copies to both IRS.gov and IRWeb.

    9) Prepare and forward eight (8) copies of the report to the Library of Congress at the following address:
    Library of Congress
    Federal Advisory Committee Desk
    Government Documents Section
    101 Independence Avenue, SE
    Washington, DC 20540-4174

8.18.1.13  (10-01-2012)
Expert Assistance in Litigation

  1. AAS is available for expert assistance in litigation matters in response to requests from the Office of Chief Counsel when cases are being considered by Government attorneys for trial, during preparations for trial, at court proceedings, in studies of transcripts for briefing, and in connection with subsequent procedures related to final disposition of litigation including contemplations for appeal or judicial decisions.

  2. Requests for assistance in litigation are received from the IRS Chief Counsel, and the Tax Division of the DOJ. Requests are also received from General Litigation Division and Disclosure Division.

  3. Assistance requested in litigating activities applies to data and information required to properly present and interpret factual matters at issue in litigation in the U.S. Tax Court, U.S. Claims Court, U.S. Bankruptcy Court, the various U.S. District Courts, and U.S. Courts of Appeals. The assistance relates, but is not confined, to matters at issue involving valuation and related accounting features. Government attorneys generally seek help that can be given by specialists who are professionally qualified as art appraisers.

  4. When expertise on factual matters is not available within AAS, specialists may be asked to help Government attorneys obtain help from other Service personnel or from experts outside the Service.

  5. Generally, the requested assistance requires review, analysis, and, when necessary, enlargement of the factual background found in the files reflecting Service action prior to litigation. Independent investigation and research often are necessary for preparing an unbiased analytical report containing appropriate findings and recommendations. The report may be used by Government counsel in an overall evaluation of the settlement potential of a case in relation to the litigation hazards of the valuation issues involved. The initiator of the report is available to Government counsel for participation in settlement conferences that may or may not be attended by experts representing taxpayers.

  6. In the event that settlement is not obtained and trial is necessary, appraisers may testify to the courts as expert witnesses to explain and clarify the findings in their reports.

  7. After a trial, Government counsel may request further assistance in studying transcripts of the court records and in preparing factual information and analyses for use in briefs. This work is not limited to initial trial courts but extends to subsequent courts of appeal.

8.18.1.14  (10-01-2012)
Disclosure of Valuation Requests and Third Party Contact

  1. There are no restrictions on disclosing to the taxpayer that assistance has been requested.

  2. In cases involving valuation issues, it will be necessary to inform the taxpayer that assistance has been requested because the AAS appraiser may have to contact the taxpayer.

  3. In general, research performed to determine fair market values and/or information by AAS does not involve "Third Party Contact;" however, employees should be aware of the Third Party Contact regulations as explained in IRM 8.1.6.2.


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