Tax Bill Lands on Illegal Eagle

by Sheppard Mullin Richter & Hampton LLP

[author: Sean Faussett]

An artistic work’s beauty may be in the eye of the beholder, but its valuation for taxation purposes is in the eye of the Internal Revenue Service. Recently, one of Robert Rauschenberg’s works captured attention for an uncommon tax and art valuation imbroglio surrounding the combine, Canyon. The IRS claims the work is worth $65 million and that the owners of the work owe $40 million in estate taxes for the work, despite having received three expert appraisals that held the work to be valueless.

The owners and appraisers of the work contend that the work (which incorporates a taxidermy specimen of a bald eagle, shot and stuffed by one of Theodore Roosevelt’s Rough Riders) is valueless because selling the work constitutes a felony under The Bald and Golden Eagle Protection Act (16 U.S.C. 668). Enacted in 1940, the Act prohibits anyone to “take, possess, sell, purchase, barter, offer to sell, purchase or barter, transport, export or import, at any time or any manner, any bald eagle ... [or any golden eagle], alive or dead, or any part, nest, or egg thereof." Violators of the Act can be fined up to $200,000 and imprisoned for one year for a first offense. A further violation of the Act is a felony and invites increased fines and imprisonment terms.

As such, the sale of Canyon would be illegal and it arguably has no market value. The piece could be donated to an organization with the lawful ability to own such a work, but this donation would not affect the now overdue tax bill. As the eagle in the piece was killed and stuffed before 1940, the owners have been able to retain the work, but the location of Canyon, which has been on long-term loan to New York’s Metropolitan Museum of Art, must always be known by US officials. At present, the piece must also carry special permits whenever it is scheduled for exhibition or travel. Finally, there is no international market for the piece because US authorities will not grant an export permit for the piece to be sold.

Any tax statement that contains an object of art valued at $50,000 or more is reviewed by the IRS and must be accompanied by a statement of the fair market value (FMV) of the work by a qualified appraiser. Similarly, the IRS uses this FMV to determine how to tax its owner. Any valuation claim submitted by an owner is also reviewed by the Art Advisory Panel, which is part of the Art Appraisal Services unit in the IRS. This Panel is charged to substantiate, dispute, or corroborate the values that are submitted with the owner’s tax returns. In existence since 1968, the Panel is diverse. Its members have variously served as museum curators, art scholars and private dealers. Disagreement among Panelists as to a work’s value is rare according to the IRS’s 2011 report on the activities of the Panel. The Panel’s recommendation about the work’s market value is then reviewed by the Art Appraisal Services unit and, if approved, becomes the position of the IRS. For 2011, the unit adopted 93% of Panel recommendations in full. Valuation matters can be appealed by furnishing new information to the IRS which might affect the unit’s assessment.

Despite the legal reality that Canyon cannot have any legal domestic buyers, and cannot be legally exported for sale, the IRS can alternately maintain the work’s tax valuation based on a theory about its black market value, as it has for other works in the past. For example, a World War II veteran’s successors inherited rare illuminated manuscripts and artifacts that were stolen by the G.I. from a German cathedral in Quedlinburg and secreted in a Texas bank vault for decades. Upon the veteran’s death, his heirs attempted to sell the items on the black market despite the lack of provenance and war-loot status, and were caught and tried for a variety of federal crimes. In addition, the IRS assessed tax penalties based on the black market value of objects that otherwise could not lawfully or legitimately be sold. Accordingly, fear the owners of Canyon, an object that otherwise cannot be sold at any price might still have value for taxation purposes.

The lawful conduct exhibited by the owners of the work in this case makes it, unlike the Quedlinburg case, extremely unlikely that there would be any attempt at realizing the piece’s black market value. In response to this tax quandary, the owners of Canyon have filed suit against the IRS to challenge the work’s valuation. Negotiations are set for in August, 2012, and some evidence suggests that the IRS art experts simply failed to consider the unique legal issues surrounding the piece in its valuation. Whether the tax bill represents a disciplined reasoning of the object’s value, or a flight of fancy on the part of the IRS, remains to be seen.

Robert Rauschenberg - 'Canyon', 1959

Please see Sheppard Mullin’s next item on art and taxation focusing on the role of freeports in tax implications of works stored in international freeports.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Written by:

Sheppard Mullin Richter & Hampton LLP

Sheppard Mullin Richter & Hampton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.