8.18.1. Valuation Assistance Procedures

(1) This IRM provides art appraisers with specific procedures for providing valuation assistance for personal property and works of art.

(2) The Specialized Examination Programs & Referrals (SEPR) organization (under Appeals) includes AAS which provides valuation assistance concerning works of art and cultural property. The primary objective of AAS is to support the mission of the IRS by providing professional advice and valuation expertise to the IRS, other Government agencies and taxpayers in connection with valuations of personal property or works of art. AAS also assists the Office of Chief Counsel and the United States Department of Justice (DOJ) with federal tax cases involving valuation issues for trial or pretrial settlement.

(3) AAS accomplishes its objectives by ensuring its employees act in accord with the Taxpayer Bill of Rights (TBOR) in every interaction with taxpayers. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights, and Pub 5170, Taxpayer Bill of Rights.

(4) AAS may provide assistance to the following:

• Appeals Technical Employees (ATEs) and Appeals Team Managers (ATMs)

• Employees and managers of IRS Compliance functions

• Criminal Investigation

• Chief Counsel

• United States Department of Justice Tax Division (DOJ)

• Taxpayers and their representatives

(5) Requesters may contact the AAS Director or Lead Appraiser by telephone and/or e-mail to informally discuss a valuation to determine the type of assistance required and whether a formal referral is needed.

(6) All referrals made to AAS are required to be submitted via the Specialist Referral System (SRS). See Specialist Referral System.

(1) Rev. Proc. 96-15 provides procedures for taxpayers to request a review of art valuation for income, estate and gift tax returns. Taxpayers may obtain a Statement of Value (SOV) from the IRS for an advance review of art valuation claims prior to filing the tax return. The SOV may then be used to complete the taxpayer’s return. The procedure generally applies to an item of art that has been appraised at $50,000 or more. See Rev. Proc. 96-15 and Rev. Proc. 2021-1 for further details.

(1) The SEPR Director is responsible for working a variety of specialized examination workstreams, providing oversight of the Commissioner’s Art Advisory Panel (Panel), providing technical and procedural guidance to the field on domestic and international issues as well as providing computational support. See IRM 1.1.7.6, Specialized Examination Programs and Referrals (AP:SPR).

(2) The AAS Director leads a staff of art appraisers who value art or other objects with a claimed value of $50,000 or more, managing the Panel process and other responsibilities (see IRM 1.1.7.6.2, Art Appraisal Services (AAS)).

(1) Policy, Planning, Quality and Analysis (PPQ&A) provides trend and data analyses, planning expertise, detailed summary reports, and leadership/assistance across the Appeals functions.

(1) See IRM 8.1.1-1 , Common Terms Used in Appeals, for common terms and definitions used in IRM Part 8. Terms listed in this exhibit are not included in this section.

(2) The table lists commonly used acronyms and their definitions:

(1) This section is the primary source of guidance for this program.

(2) Authors, reviewers and managers can find helpful information on these websites:

• AAS-Intranet site, https://portal.ds.irsnet.gov/sites/ap/Pages/SEPR/AAS/Default.aspx.

• AAS-IRS.GOV site, https://www.irs.gov/appeals/art-appraisal-services.

(3) See IRM 4.25.12.3, Referrals of Artwork to Art Appraisal Services and the Art Advisory Panel.

(4) See IRM 4.48.2.3, Art Appraisal Services Referral Procedures.

(5) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see https://www.irs.gov/taxpayer-bill-of-rights

(1) AAS is available to provide appraisal service on works of art including:

• Paintings

• Drawings

• Prints

• Sculptures

• Antiques

• Ceramics

• Glass

• Decorative arts

• Textiles

• Carpets

• Silver

• Rare manuscripts

• Antiquities

• Ethnographic art

• Collectibles

• Coins

• Archives

• Historical memorabilia

(2) If an IRS 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, a referral to AAS for assistance is mandatory (IRM 4.48.2.2, Criteria for Requesting Art Appraisal Services Assistance). Subject to the discretion of AAS, taxpayer valuations may be reviewed with the Commissioner’s Art Advisory Panel. The IRS employee who submitted the SRS request via the Specialist Referral System must provide the assigned art appraiser with: taxpayer appraisals, images and supporting documents via e-mail or flash drives and hard copies can be sent with Form 3210, Document Transmittal, via UPS Ground.

(3) 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. Prior to contacting AAS, the requester should ascertain the following facts:

1. Name of artist

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

3. Date acquired by taxpayers

4. Cost of acquisition

5. Valuation date

6. Claimed fair market value

(4) For Appeals cases, AAS will recommend a range of values for settlement purposes, 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.

(1) Taxpayers may request an advance valuation of art from the Internal Revenue Service, also known as a Statement of Value (SOV). A 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. Fee amounts are updated biannually. Payments for a SOV must be made via https://pay.gov/public/home. A SOV is a valuation review only and in the case of non-cash charitable contributions, it is not a review of the legal substantiation requirements or deductibility of the donation.

(2) The Service may decline to issue a SOV when appropriate in the interest of efficient tax administration. In such cases, the AAS Director will prepare the necessary documents to generate a refund of the fee through https://pay.gov/public/home.

(1) Art valuation referrals will be submitted via SRS and assigned to an appraiser by the Director or Lead Appraiser generally within five business days after assessing the case for SOL, completeness of submission, specific customer request, need for the Panel review, and other criteria.

(2) Cases will be assigned to appraisers based upon specialty area and caseload.

(3) Cases from Appeals that were reviewed by AAS in Exam will be assigned to a different AAS appraiser unless the taxpayer provides an ex-parte waiver.

(4) Upon assignment, SRS notifies the customer of the assigned appraiser.

(1) An AAS appraiser, once assigned a new case and in receipt of all relevant documentation, will ask the administrative officer to enter the following information, as relevant, on ACDS/Arts Valuation:

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

2. The taxpayer’s name (last name, first name),

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

4. Classification of referral as Initial/Recon/SOV,

5. Item type: Decorative Art (DA), Fine Art (FA) or Other (OT),

6. Staff or the Panel review (drop down menu),

7. Tax Type (drop down menu - Estate, Gift, or Charitable Contribution),

8. Docket number (if present),

9. The number of items,

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

11. Earliest tax period (YYYYMM),

12. Earliest statute of limitations expiration date (MM/DD/YYYY),

13. Referral date (date of receipt on SRS) (MM/DD/YYYY)),

14. Appeals receipt date (MM/DD/YYYY),

15. The taxpayer’s total claimed value of the items under review (no $ sign or commas),

16. The valuation date (MM/DD/YYYY),

17. The assigned appraiser (drop down menu),

18. The assigned date (MM/DD/YYYY),

19. The Panel meeting number and date,

20. The requesting entity (drop down menu - SB, LB, TE, W&I, CCl, CI, DOJ, TP),

21. The requester’s name,

22. The requester’s phone and fax numbers,

23. The requester’s street address,

24. The requester’s e-mail address (if available), and

25. The taxpayer’s appraiser company, name and professional affiliation (drop down menu).

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

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

(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:

(3) A complete description of the item will include:

1. Full name of artist/sculptor/maker, nationality and birth/death dates or alternately the culture, or place of origin,

2. Title of work and/or subject matter,

3. Date created/execution date or age,

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

5. Size (cite actual dimensions in inches, the U.S. standard system of measurement), unframed, or weight, if applicable, for objects made from silver, gold, or other precious metals, and

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

(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 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, Invaluable, Artprice, Askart and found multiple comparables for the (description of item being researched) and determined that the claimed value is acceptable" is a sufficient entry.

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

• AC – Final report submitted for review

• 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. Periods of inactivity should be properly documented.

(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.

(1) Time reporting should be input to ACDS/Arts Valuation contemporaneously with the action.

(2) Report time in increments of one hour.

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

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

(2) AAS may reject referrals for cases when the statute of limitations will expire within 180 days.

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

1. Inform the AAS Director that the statute will expire within 180 days or is in jeopardy.

2. Contact the referring employee to establish a plan of action and inquire if a statute extension is being pursued in gift tax or income tax cases.

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

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

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

(3) Appraisers should consider all relevant factors that affect the value.

(4) Appraisers should use the appropriate 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 relevant value characteristics such as style, date, subject, medium, authorship, rarity, etc.

4. The effect upon value of condition and restorations.

5. The effect upon value of provenance and authenticity.

6. The effect of relevant contractual or legal restrictions.

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

(5) AAS appraisers may assist referring employees with the issuance of IDRs or providing questions for interviews to obtain more complete information on a case.

(1) The appraiser should first determine the quality, professionalism and credibility of the submitted appraisal and whether the appraiser and appraisal meet the legal standard and qualifications required for the specific tax type.

(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 use of the appraisal, users of the opinions and conclusions, and the purpose of the review assignment.

2. Identify the property under review, the 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 and the identification of the subject property.

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) An appraiser should conduct additional fact-finding, research, and/or analyses necessary to make a value determination.

(1) The extent and content of the work product depends on the needs of each case. The appraiser will determine the type of report necessary for the assigned case. Memorandums are issued for the following valuation conclusions:

• An individual item’s claimed value is supportable;

• A collective claimed value for a group of items is supportable. This does not require agreement with every individual claimed value;

• A decrease in value that is in the taxpayer’s favor in the case of an estate or gift tax, and

• A reconsideration.

1. Appraisal review reports are issued in cases where the AAS appraiser is recommending an adjustment to the taxpayer’s claimed value.

(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) Valuation reports should contain sufficient information relating to the items in Identifying Critical Factors, Documenting, and Analyzing above, to ensure consistency and quality and to support the assumptions, analyses, and/or determinations of the appraiser.

(4) Each written valuation report should contain a signed certification statement that is similar in content to the following: “To the best of my knowledge and belief:

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

(1) The appraiser will complete the following actions when closing a case:

(1) When notified by AAS appraiser, the administrative officer closes the case in ACDS/Arts Valuation by completing the following fields:

1. AAS Closure (date closed MM/DD/YYYY).

2. Form 8256, Art Valuation, sent (date MM/DD/YYYY).

3. Initial IRS Value: (AAS recommended value for items reviewed - no $ sign or commas).

4. Confirm number of items and claimed value are accurate.

(2) 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.

3. Upon receipt, record agreed or unagreed figure (no $ sign or commas) in appropriate ACDS field.

(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. See Form 8256 procedures in IRM 4.48.2.4, Form 8256 Procedures.

(2) The updated original Form 8256 with AAS closing memorandum or 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. E-mail the completed Form 8256 to the AAS appraiser (preferred) or mail a copy to:

Internal Revenue Service/Appeals
Attn: Art Appraisal Services
1111 Constitution Ave, NW, Room 3615
Washington, DC 20224-0002

(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.

(1) Consistent with IRM 8.7.1.5, Valuation Issues in Appeals Cases, AAS offers assistance to Appeals Officers handling art valuation cases in an effort to achieve settlements and avoid litigation. Referrals to AAS should be made for any case with a single artwork valued in excess of $50,000.

(2) Requests for art valuation assistance should be made on SRS.

(3) If a case was previously referred to AAS in Exam, a different AAS appraiser will be assigned the case at the Appeals level, unless ex-parte is waived by the taxpayer.

(4) The AAS appraiser assigned to the Appeals case, will confer with the Appeals Officer regarding a timeline for the review of the appraisals and related documents for both the government’s position and the taxpayer’s position.

(5) If the taxpayer submits new information to the AAS appraiser assigned to the Appeals case, follow the guidelines in IRM 8.6.1.7.5, Taxpayer Provides New Information.

(6) If requested, the AAS appraisers assigned to the Appeals case, may participate in taxpayer conferences or may provide telephone support to Appeals Officers prior to issuance of a final work product, however, any specific settlement numbers should be reviewed with the AAS Director, or the Lead Appraiser before offered to the Appeals Officer.

(7) After review with Lead Appraiser/Director, the AAS appraiser assigned to the Appeals case will provide the Appeals Officer with an Appeals memorandum signed by the AAS appraiser that provides the strengths and weaknesses of both parties’ positions, any identified hazards of litigation or conflicts of interest and a recommended value or range of value for settlement purposes. Settlement recommendations should be based upon the merits of each case and be fair to both the government and the taxpayer.

(1) The procedures for appointing experts for the Panel are outlined in IRM 6.304.1, Expert and Consultant Appointments, to ensure timely submission of approval requests to Treasury; and to ensure adherence to regulations, policies, and procedures (such as the FACA of 1972) governing the appointment of Experts and Consultants.

(1) The 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. The AAS Director should begin the process to update the charter at least 120 days prior to the expiration of the charter.

(2) Procedures for requesting the approval of the Treasury Assistant Secretary for Management and Chief Financial Officer to renew the Panel are as follows:

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

(2) The AAS Director will determine whether a meeting should be convened.

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

(2) Materials for review by the Panel should be forwarded to the Panel members three weeks before the Panel meeting.

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

(2) The AAS Director will prepare and forward the notice of closed meeting and the Federal Register notice to GLS for review.

(3) After GLS' review, submit the notice for signature through the chain of approval up to either the Chief or Deputy Chief, Appeals. Include Form 14074, Action Routing Sheet.

(4) Forward the approved notice and three copies to the Federal Register Liaison in the Office of Chief Counsel. Provide an electronic copy via e-mail.

(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 website by the Designated Federal Officer (DFO), normally the AAS Director. This is to be completed no later than October 31 following the fiscal year end.

(2) On a fiscal year (ending September 30) basis, the DFO prepares the "IRS Commissioner’s Art Advisory Panel Report to Congress". Based on the contents of this report and the statistical information to be compiled, the report should generally be completed no later than March 31 following the close of the fiscal year.

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

(1) Section 7(b) of the Federal Advisory Committee Act (FACA), as amended, directs agencies to provide their assistance to GSA in conducting the Annual Comprehensive Review (ACR). The AAS Director is responsible for entering Federal advisory committee data into the GSA FACA database throughout the year, and for reviewing the data during the ACR to ensure it is complete, up to date, and accurate.

(2) The General Services Administration (GSA) Committee Management Secretariat (Secretariat) initiates this review toward the end of each fiscal year, provides guidance to the AAS Director on how the review will be conducted, and outlines the deadlines for each part of the review.