Record-Keeping for Collectors

12/08/2017     News and Film, Appraisal Services, Trusts and Estates

By Christopher MichaelsThese days, it seems that hardly a week goes by without a story of stolen art commanding headlines across the globe. Whether it 's a World War II Nazi-looted artwork coming up for auction or the report of a smash and grab job at a local artist 's studio, stories of stolen artwork attract attention. Just this past week, the City of Dusseldorf abruptly cancelled an art exhibit that was set to highlight the life and work of art dealer Max Stern over restitution claims. Additionally, the Van Ham auction house in Cologne recently withdrew a painting that had been looted from Adolf Hitler and was set to go to auction last week. Regarding the piece 's history, the managing director and owner of the auction house told The Art Newspaper that the house deliberately withheld the full provenance of the work so as not to attract unwanted attention. There is also an entire industry dedicated to the recovery of stolen art, with companies employing art historians, lawyers, and genealogists to track and recover lost artwork.These stories highlight the importance of provenance, or the legal chain of title of an artwork. The concept of provenance involves everything from art forgery, authentication issues, and claims from the descendants of past owners. Indeed, entire books can, and have been written about the subject of provenance. While the stories of World War II Nazi-stolen art and high-profile art thefts are attention-grabbing, there are some practical takeaways for the average collector who wants to build an art collection. Specifically, collectors can help to build the provenance of pieces in their collection through the maintenance of accurate records.Accurate and thorough record-keeping is one of the most important, and often overlooked, aspects of maintaining and building an art collection. Take, for example, a couple who jointly participates in the building of an art collection. Records for the collection should expressly indicate which of the two own the piece or if each has a fractional ownership. Insurance policies, likewise, should reflect the ownership documents. Additional records for collectors to contemplate include any applicable certificates of authenticity, correspondence from prior owners, bills of sale, and import or export documents. Import/export documents and corresponding permits are especially important for any pieces, especially musical instruments, containing ivory. I have recently handled cases for private collectors where pieces have been seized by U.S. Fish and Wildlife for failing to obtain and document the required import permits. If a piece was obtained directly from the artist, a collector should document the acquisition and, if possible, obtain correspondence from the artist about the date of purchase, price paid for the work, and how the work was made. Often, the documents surrounding the creation and sale of work can add value to the work at a subsequent sale.Maintaining accurate records is especially important when an appraisal must be obtained for an art object. For example, the IRS offers guidelines to taxpayers and appraisers related to appraisals obtained for Federal income tax purposes. The guidelines, outlined in IRS Revenue Procedure 66­49, 1966­2 C.B. 1257, state that for appraisals of art objects, and for paintings in particular, numerous data points should be collected, including a complete description of the object to be appraised along with factors upon which the appraisal was based. Appraisal report guidelines have also been established by The Uniform Standards of Professional Appraisal Practice (“USPAP”), which were developed by the Appraisal Standards Board of the Appraisal Foundation. These guidelines, available at, set forth the information that should be included in a report, including, among other things, the intended use of the appraisal and a summary of the techniques employed in the appraisal.Maintaining accurate records throughout the lifetime of the particular work being appraised will not only make the appraisers job easier, but the more documents available to support the valuation of the piece being appraised will decrease the likelihood that the IRS will challenge the value attributed to it.About the AuthorChristopher Michaels is an attorney at The Chartwell Law offices in Philadelphia.  He has represented artists, private collectors, and galleries and frequently authors articles on art law.