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One Work, Many Valuations: Why Pricing Art Is So Difficult

A single artwork can carry multiple valuations depending on whether the assessor is an auction house, an insurer, an appraiser or a dealer.

It’s tax time in the U.S., which means many collectors are trying to determine the value of works of art they’ve donated, because the Internal Revenue Service wants an exact number whenever a taxpayer claims a charitable deduction for a donated artwork valued at over $5,000. It describes that number as “the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts”—otherwise known as the fair market value.

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Figuring out that price isn’t always easy, however. “You can’t always find a willing buyer,” Ralph E. Lerner, a lawyer and owner of Art World Advisors, told Observer, adding that he’s been representing clients contesting valuations “for 30 years.” The IRS suggests tax filers look at “comparable” sales, preferably sales that are close to the date of a donation, but artworks can be very unique, and “not every Picasso is the same.”

There appears to be no single way to value an object. Indeed, the New York City-based Appraisers Association of America identifies nine methods for establishing the value of an object: auction replacement value, fair market value, forced liquidation value, marketable cash value, market value, orderly liquidation value, retail replacement value, retail value, and salvage value. Beyond that are agreed-upon values (set in a policy by an insurance company and updated periodically), damage and loss appraisals, auction house estimates and auction sales records, as well as what dealers say something is worth. In short, the value of any artwork is situational.

Regular Antiques Roadshow watchers........

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