An artist by the name of Robert Raushenberg created a piece of art entitled "Canyon", that includes a stuffed bald eagle. It is therefore a felony to try and sell it (bald eagle feathers, The art dealer that owned the piece died, and it was inherited by her children. The only reason they can hold it is because of an agreement with the United States Fish and Wild Life Service, and as a condition it states the piece must be on long term loan to the Metropolitan Museum of Art - which does ensure it (but that value is 'confidential')
Keep in mind that while the heirs technically 'own' it, that is just a technicality. They can't sell it, keep it in their home, or even MOVE it to a different museum.
Since it can't be sold, (and they can't keep it or even move it) their accountant valued it as $0 (three different appraisers did that). The IRS said it is worth $65 million and is demanding $29.2 million taxers. Note that this is in addition to the $471 million in estate taxes they already paid. The $29.2 million includes penalty tax rates. In addition, they will owe an extra $11.7 million in penalties, for a total tax of $40.9 million dollars.
Given the fact that the MET ensures it, you would think it would be possible to price. However, the IRS has been incompetent - they originally valued it at $15 million, but upped the price.
The $15 million value was based "solely on artistic value', without reference to the laws, despite the fact that the IRS's official policy is to take account of the laws, which should of course LOWER the price - as it makes it harder to sell. For example, some machine guns are legal to buy in the US without expensive permits and licenses because they were grandfathered in, before the ban on machine guns. They sell for FAR more than similar guns that are illegal to buy without said permits.
The IRS however got the $65 million figure by assuming the item would be sold on the black market.
Both sides have acted in bad faith - the IRS is being just as stupid as the heirs.
The really stupid thing is the eagle can easily be separated from the rest of the artwork.
This is how I what I would do.
First, state I am judge and the law is all about technicalities, not justice. If I declare something is not a sale, then it's not a sale - even if it looks like a sale. Then give both parties an ultimatum. Have the IRS state an amount of money that they think it is worth. Then give the heirs a choice.
- Pay taxes on that value - without penalties of any kind (don't punish them for making a fairly reasonable decision, especially when the IRS is being a moron.)
- Donate the eagle and only the eagle to the IRS, and accept the IRS's offer (the same one the IRS wanted them to pay taxes on) as a legal sale of the rest of the artwork to the IRS. Subtract out the tax bill for that value. As a judge, he can declare that it is not a sale of the eagle, even if it looks like a sale. Declare it to be a sale of the non-eagle bits, and the eagle is being donated with a states valued of $100. If the IRS chooses to keep their two separate pieces of property together, as per the original art, that's their business.
- If the IRS refuses to pay the money, then the judge declares the bird the property of the Smithsonian, on condition that the Smithosian loan it out to any museum that purchases the rest of the art. Declare the eagle worth $100, while the heirs keep the rest of the art and put it up for bid. Also, throw the IRS representatives that priced it but refused to buy it (excuse me, refused to buy the non-eagle portion of the art) at that price in jail for contempt of court.
The judge could tell the heirs that if they want to donate it to a museum of their choice, that he would be willing to declare it worth $100, and have them pay taxes on that money. If the judge is being a smartaleck, he could even have them pay the penalty tax rates on that $100.
Usually it makes far more sense to settle an issue out of court. With the right judge, and a bit of creative thinking, you can solve most issues - as long as both parties are willing to negotiate IN GOOD FAITH.