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IRS Goes After Unsellable Artwork for $40 Million

Back Taxes Take the Vision Out of the Art

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Next time you buy a piece of artwork, make sure it’s sellable.

That’s the lesson two descendants of a New York art collector are learning after inheriting a masterpiece that’s pegged with a $40 million IRS tax bill.

But another lesson being learned is that the IRS uses the black market to value certain items, such as artwork.

A masterpiece entitled “Canyon” by Robert Rauschenberg is touted as a great work, but it includes a stuffed Bald Eagle. Federal law prohibits people from selling or possessing the national bird, so the heirs can’t sell it.

They inherited it as part of a $1 billion art collection, and are now in the middle of a feud with the IRS over its supposed value and the resulting tax bill. They claim it’s worth zero because it can’t be sold, while the IRS claims $65 million.

But the heirs’ attorney has said the IRS’s former art director told him a market existed for the unsellable item. A possible buyer: a reclusive billionaire halfway across the world who may want to hide it.

The IRS’s argument for the $65 million figure is aggressive. They value “Canyon” at the price that similar pieces have sold for, not the price it could legally sell for. People should think about that tactic when they ignore their back taxes.

Until the two sides compromise, the heirs are stuck in between a rock and a hard place.

They can’t sell “Canyon” to zero out the tax bill, and not paying it could lead to an IRS bank levy or wage garnishment.

But you don’t have to be heirs to a $1 billion art collection to run into trouble with your back taxes. IRS enforcement actions can be pretty aggressive, even if you don’t have your own “Canyon” of back tax debt.

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