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Feb 1, 2005 12:00 PM
Valuing Art
Boris Leavitt amassed a fortune in the mail order business and left a contemporary art collection that was appraised at $12.4 million when he died in June 1996. One work alone, Willem de Kooning's “Woman,” was worth $9 million. At auction five months later, the collection fetched a total of $20 million — with “Woman” selling for $15 million.
Soon after, the Internal Revenue Service's Art Advisory Panel found that Leavitt's estate had undervalued his art collection by $7.6 million and owed another $3.8 million in taxes. The estate protested, arguing that its valuation was correct at the time of Leavitt's death; there had simply been a sharp, unanticipated jump in contemporary art prices in the ensuing months. The panel was unswayed. After a protracted legal battle, the two sides settled in August 2002, with the estate agreeing to pay an additional $1.1 million in taxes plus interest.
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