http://www.ralphelerner.com Ralph E. Lerner is an Art law and individual tax and estate planning specialist at national general practice law firm. Ralph Lerner's experience consists of advising on a great variety of tax matters including all aspects of estate planning and will drafting, estate and gift tax problems, charitable contributions, trust accounting, individual income tax planning, private foundations, and Tax Court proceedings. Ralph Lerner's experience includes extensive dealings with the Internal Revenue Service at all levels. Ralph E. Lerner has specialized knowledge in all aspects of art law including dealing with auction houses, consignment agreements, artist commission agreements, and tax planning for items of tangible personal property. http://youtu.be/aqDUKnRM8PY

1. Nazis, Fakes, Taxes
by
Ralph E. Lerner
RalphELerner.com
ralph@artworldadvisors.com
590 Madison Ave, New York, NY, 10022
(212) 521-4437
http://www.RalphELerner.com/

2. Edgar Degas,
LANDSCAPE WITH SMOKE STACKS
Pastel over monotype, ca. 1890-93http://www.RalphELerner.com
/

3. STATUTE OF LIMITATIONS - TITLE
§ 2-275
1 - prompt filing of suits
2 - protection for a defendant after period of repose -
evidence can be lost or destroyed with passage of time
3 - promotion of free trade
An action for breach of any contract for sale must be commenced
within four years after the cause of action has accrued.
http://www.RalphELerner.com/

4. DISCOVERY RULE
Gregory Erisoty v. Jacqueline Rizik
An owner’s cause of action does not
accrue until he discovers or by
exercise of reasonable diligence
and intelligence should have
discovered, facts which form the
basis of a cause of action
Corrado Giaquinto
Winter
http://www.RalphELerner.com/

5. DEMAND REFUSAL RULE
DeWeerth v. Baldinger
An owner’s obligation to make a
demand without unreasonable
delay includes an obligation to use
due diligence to locate the stolen
property
Claude Monet
Champs de Ble a Vetheuil
1879
http://www.RalphELerner.com/

6. Guggenheim v. Lubell
An owner has no obligation to use
due diligence to locate his
stolen property - whether it
was unreasonable not to do
more is an issue of fact
relevant to the defense of
laches
The Cattle Dealer
(Le Marchand de Bestiaux)
Marc Chagall
1912
http://www.RalphELerner.com/

7. Patriarchate of Jerusalem
v. Christie’s
An owner’s reasonable diligence in
locating his lost property is
highly relevant to a laches
defense
Doing nothing for 70 years is not
reasonable
Archimedes Palimpsest 10th
century manuscript contains
writing of Archimedes
http://www.RalphELerner.com/

8. STATUTE OF LIMITATIONS -
AUTHENTICITY
Rosen v. Spanierman
Four year statute of limitations
applies.
A warranty of authenticity does not
extend to future performance of
the goods.
Lack of knowledge of the breach is not
a defense.
The Misses Wertheimer
John Singer Sargeant
http://www.RalphELerner.com/

9. BALOG v. CENTER ART GALLERY
Hawaii
In the case of artwork which is certified authentic by an expert in the field
or a merchant dealing in goods of that type, such a certification of
authenticity constitutes an explicit Warranty of future performance
sufficient to toll the U.C.C.’s statute of limitations - but only in
Hawaii http://www.RalphELerner.com/

10. DAMAGES - BREACH WARRANTY TITLE
Menzel v. List
1932 - Menzel Purchases for $150
1941 - Painting taken by Nazis
1941-1955 - Location not known
1955 - Perls purchases from dealer
in Paris for $2,800
1955 - Perls sells to List for $4,000
1962 - Menzel say “Give it back”
1966 - Jury for Menzel - value now
$22,500
Jacob’s Ladder
Marc ChagallMeasure of damages $22,500
http://www.RalphELerner.com/

11. DAMAGES - FRAUD
Nacht v. Sotheby’s
1981 - Nacht purchases for
$23,815
1996 - Nacht discovers it is
not authentic - if it was
authentic value
$225,000
Measure of damages $23,815 Francis Picabia
Josias
1930
http://www.RalphELerner.com/

12. Edgar Degas,
LANDSCAPE WITH SMOKE STACKS
Pastel over monotype, ca. 1890-93
http://www.RalphELerner.com/

13. TAXATION
http://www.RalphELerner.com/

14. Where is the Painting?
http://www.RalphELerner.com
/

15. Cost
FMV
Deduction (within 30% limit)
Tax Saved (Fed. 35.0 rate)
Cost
UNTAXED PROFIT
$ 1,000
$ 10,000
$ 10,000
$ 3,500
$ 1,000
$ 2,500
and you enjoyed the use of the donated
item for the period of ownership
The Art Tax Shelter
http://www.RalphELerner.com/

16. The Four Questions
1. What type of donee organization - public charity
or private foundation?
http://www.RalphELerner.com/

17. 1. What type of donee organization - public charity or
private foundation?
2. What type of property - ordinary income type
property or long-term capital gain type property?
The Four Questions
http://www.RalphELerner.com/

18. 1. What type of donee organization - public charity or
private foundation?
2. What type of property - ordinary income type
property or long-term capital gain type property?
3. Have you satisfied the related-use rule?
The Four Questions
http://www.RalphELerner.com/

19. 1. What type of donee organization - public charity or
private foundation?
2. What type of property - ordinary income type
property or long-term capital gain type property?
3. Have you satisfied the related-use rule?
4. Have you obtained a qualified appraisal by a
qualified appraiser?
The Four Questions
http://www.RalphELerner.com/

20. FUTURE INTEREST RULE
Section 170(a)(3) - There is no charitable deduction for a
gift of a future interest in tangible personal property
until there is no intervening interest in, right of
possession of, or enjoyment of the property held by the
donor, spouse or certain related individuals. http://www.RalphELerner.com/

21. FRACTIONAL INTEREST
Winokur v. Commissioner
Women of Warhol
Marilyn, Liz & Jackie
http://www.RalphELerner.com/

22. FAIR MARKET VALUE
Hypothetical Willing Buyer/
Hypothetical Willing Seller
http://www.RalphELerner.com/

23. Quedlinburg Treasures
Fair Market Value is determined in the retail market in
which the item is most commonly sold to the public.
http://www.RalphELerner.com/

24. Rev. Proc. 96-15
Advance Valuation Ruling Request
1. Applies to items $50,000 and above
2. User fee of $2,500 for first three items, $250 for
each additional item
3. Requires a qualified appraisal by a qualified
appraiser
4. Can be used for income tax or estate tax purposes
5. The ruling, once issued, is binding on the IRS
http://www.RalphELerner.com/

25. ROTHKO
Avoid Conflicts of Interest
Duty of Loyalty
An executor must care and manage the assets and affairs of the estate
as would prudent persons of discretion and intelligence accented by
“not honesty alone” but by the punctilio of an honor the most sensitive.
http://www.RalphELerner.com
/