A recent article in the New York Times covers an interesting position taken by the IRS in relation to a piece of artwork entitled “Canyon” and created by Robert Rauschenberg (the “Artwork”).   The “sculptural combine” Artwork includes a stuffed bald eagle, which is a species under federal protection in the United States of America.  If the Artwork was to be sold, it would be a felony.

The Artwork is owned by the estate of Ileana Sonnabend, a New York art dealer.  The heirs to her estate, have been caught in an unusual position, where they are unable to sell the Artwork without committing a felony.  Due to the artwork being unsellable their appraisers valued the Artwork at $0.00.

The Internal Revenue Service (“IRS”) did not agree and valued the Artwork at $65 million dollars and demanded $29.2 million in taxes.  The estate is currently appealing this decision in the tax court in the United States.

It will be interesting to see what the tax court decides.  Although it seems as though the estate may have enough funds to satisfy the tax judgement (the Artwork was part of a $1 billion art collection), if this was the main asset of the estate, the heirs would find themselves in a tough situation having to come up with the funds to pay the tax assessment.