Art Dealers Group Suggests Changes to Appraiser Requirements in Guidance on Charitable Contributions

Full Text:

Date: Feb. 6, 2007

From: Robert Dance [robertdance@msn.com]
Sent: Tuesday, February 06, 2007 4:40 PM
To: Notice Comments
Subject: Comments: Section 170(f)(11) Notice 2006-96
Attachments: IRS.Comments.PADA.doc

Comments
Regulations Under Section 170(f)(11)
Pursuant to Notice 2006-96

from:

Private Art Dealers Association
P.O. Box 872
Lenox Hill Station
New York, NY 10021
212-572-0772
pada99@msn.com

Hard copy to follow by mail.

The Private Art Dealers Association (PADA) hereby submits its comments with regard to the proposed regulations to be issued under Section 170(f)(11) of the Internal Revenue Code dealing with Qualified Appraisals and Qualified Appraisers of donated personal property.

PADA is a not-for-profit organization, chartered in 1990, consisting of professional art dealers working in the Fine Arts, particularly European and American, and trading in Paintings, Drawings, Sculpture, Prints and Photographs. Each of PADA's member dealers is required to be a full-time specialist with expertise in a particular area of the fine arts who works exclusively by appointment. PADA has 55 members located throughout the United States, with a high concentration of members located in New York City. Membership in PADA is by invitation. Candidates for membership must have been in business for at least five years and demonstrate a high degree of professionalism and expertise. Most PADA members have more than twenty years of experience as art dealers. PADA gives an annual cash award to an art-world institution, presented at a special dinner held each November in New York City. To date PADA has made thirteen grants and recipients include The Studio Museum in Harlem, El Museo del Barrio, and the Conservation Institute (New York University).

From the organization's inception, PADA has operated an Appraisal Service evaluating, on a fee basis for clients, works of art in situations that have tax consequences, particularly where works of art have been donated to charitable institutions (most often museums). The PADA Appraisal Service was modeled on the successful Appraisal Service operated by the Art Dealers Association of America (ADAA). Before the PADA Appraisal Service was instituted, the organization consulted with members of the IRS Art Advisory Panel as well as IRS officials who provided valuable assistance in the design of our service. PADA's goal from the start has been to provide the best appraisals possible by following all government guidelines.

The PADA model for appraising works of art is simple and effective. Only works in which members of the organization have expertise are accepted for appraisal. Once accepted, three appropriate members of the organization are consulted, independently, as to an object's value and each prepares a written report. PADA members are aware of the identity of the institution receiving the donation but not the name of the individual client. All valuations must be based, as closely as possible, on actual sale prices for similar objects sold. These values might come from auction records or might come from our members' knowledge of the marketplace. The values and supporting information are then sent to the PADA office where the information is collated and a formal appraisal is prepared. If the values provided by the three member dealers are materially disparate, the process is started again to insure that an accurate value is reflected in the appraisal.

The proposed regulations demand that a "Qualified Appraiser" be an "individual" who has attained "minimum education and experience requirements." It is PADA's belief that while there are excellent individual appraisers, the proposed regulation should not be so restrictive as to prohibit professional organizations such as PADA from engaging in appraising works of art. In fact, there might be advantages, both ethical and in terms of accuracy to systems such as that used by PADA. Members of PADA are all experienced dealers, and each has a particular expertise in an area of the Fine Arts. When this knowledge is compiled in a collaborative manner, as in the preparation of a PADA appraisal, it is our belief that the best and most up-to-date information can be gathered and provided to our clients in a way that may not be possible for a single individual appraiser. Most members of PADA are college graduates, and many have advanced degrees in areas as various as art history, law and business. Experience, members of PADA believe, is the best educational tool, and working daily in the marketplace seems the best manner in which to know the value of goods traded. Moreover, an educational requirement might have the effect of disqualifying some of the foremost experts on the market for works in their fields.

We ask that the proposed regulations recognize the important, even critical, role that working continually in the buying and selling of works of art plays when it comes to giving a client the best indication of market value.

Thank you for your consideration.

Robert Dance

President
Private Art Dealers Association
P.O. Box 872
Lenox Hill Station
New York, New York 10021
212-572-0772
Pada99@msn.com