I can tell you about very good appraisers getting seventy-five an hour and extremely good appraisers getting three hundred and fifty an hour—and what you property is. You know if you have a collection of books that somebody can get on line and get most of the numbers for, you don’t need the three hundred and fifty dollar an hour person. But if you’ve got some very difficult kinds of properties you may need somebody that has a lot more experience and you’re going to have to pay for that. So fees I think are something that you look at as well as their expertise, their education, their experience and you have to see if you like them, if you get along with them. You are inviting them to—not so much for the stakes but with the donation these are probably items that you have collected with some care and love and you want to make sure that they have the same feeling about them that you do, you know, you want them to—people want you to appreciate the property they have. I think that become more, can you work with this person rather than do they have a more conservative or not approach to how they value things. Hopefully you will get through that when you decide that they have the proper education and expertise to do the job that you need done.
So there is a very big difference between fair market value and replacement value?
Tropper: There can be; there isn’t always but there can be. To go back to the map for just a second and I have—surely have not looked at prices of those in a very long time but because it sells on Madison Avenue at twenty-five thousand, that may be for a mint condition piece in fact what replacement value is. If you go to an auction house and start to look at the many ones that are there you may find that they are selling from seven thousand to fifteen thousand. That is what you’re going to use for your fair market value where the replacement value may be the highest price that you find.
My best example is a piece of sculpture that I worked with years ago. Somebody came to me with an Arita sculpture and I started to price it in the secondary market and came up with twenty-seven thousand dollars and after a while dealt with the dealers and discovered I could get it discount and came up with a replacement value for the twenty-two thousand. Then they called me and said gee, we’d really be interested in selling it. Well I started to look at the auction market and the auction markets for not necessarily that particular piece but the same vintage and the same type of work and the same size and the same material, it was three to five thousand dollars. So we were looking at four fold increases in prices; pretty significant. So yes, there can be a huge difference.
Now there are also times where the auction market or the market where most people are buying, the most common market is the only place. It’s got everything so it may in fact wind up being the same value but you can’t count on it because I’ve come across—I just finished an appraisal for somebody painting a built in nineteenth century painting. If I was just looking at the auction markets which would be the fair market value, that’s what they had wanted, I would have likely come into about twenty thousand dollars. In fact the mark up on this particular artist and he has only sold in galleries in Europe is three fold. I wound up with a replacement value of sixty thousand dollars on it because if they want to go get it—and one of the big differences is timeliness. If you want to replace something you shouldn’t have to wait. You’re buying insurance to replace it. You shouldn’t have to wait six years for it to come up at auction. If it is selling—again Madison Avenue is a good example but if it is selling there and that is what the price is, that’s what you are insuring for. So there can be a huge difference but not always. It really depends on the particular item, where it sells most commonly, who is buying and when and I mean there are many, many circumstances. Broad generalizations generally don’t work. The result of that is that you need an appraiser who is familiar with the kind of property that you are working with.
How do you think this law will ultimately affect donations of personal property to institutions?
Tropper: One of the concerns I have right now is for smaller institutions. IRS has always had forms that small institutions have to complete regarding the amount of donations that they receive in a year. I think sometimes some of the changes that have been made and these are tentative changes right now, are very burdensome on a smaller institution. It doesn’t make a bit of difference to the Smithsonian. It doesn’t make a bit of difference to the National Gallery. Some small college that is receiving these properties and it may be a small library at a small college, is now going to have to be—has a large number of forms, etcetera, that it has to fill out including taking responsibility for the valuation. That can be very problematic for a small institution.
I think that the new law and I’m not talking about the—there are some very strong problems with household contents and that kind of thing and I’m not dealing with that one. I deal with this with you because I think you know, after five hundred dollars you have to have an appraiser in to tell you that the old clothes that you are donating to goodwill are worth a certain amount of money. I’m not talking about that part of the law. I think that it is not going to make a terribly large difference to donors; I really don’t. I don’t see a great deal of difference to donors.
I think what they are going to find is that there are going to be fewer appraisers willing to do this work who have not—who aren’t qualified. In other words, the book dealer who used to write you a one page note, I don’t think that person is going to be willing to do it anymore.
And there are plenty of them?
Tropper: Yes, I know that. If there are large collections, they should have never tackled that problem anyway and probably they are some of the reason that this law actually is going into effect. So what I would hope is that people would have to go to a qualified appraiser to do the work. I hope that wouldn’t make a big difference in what they were donating. I actually don’t think it will. I think what might happen is that people might decide it’s not worth the effort of getting an appraisal and taking it as a tax deduction. But do I think that it will decrease donations to these institutions? Yes, maybe to some extent but not to a large extent. I think if somebody is willing to—is planning on making the donation, they’re going to make it no matter what.
My art library, I mean I know where it’s going when something happens to me and whether or not my estate gets a tax deduction or not, I don’t really care. I mean it would be nice if it does and that my heirs—not that I have heirs but that my heirs would not have to pay that additional estate tax; I would still want it to go there. I think probably my executor would take care of that. I don’t think I’m alone in that.
What else should we know?
Tropper: You need to note that—and let your readers know that there are new forms and regulations that have come out as the result of this law. There is something called an 82/83 form which is the non-cash charitable contribution form. It is a form that was released in December, 2006 and many people are still using the old form. It is really important to make sure that you’re using an updated one because there are new things that appraisers have to sign. There are also two sets of regulations and that’s IRS form 526 or circular 526 and a 561. One of them has been completely updated and the other one has not but they need to get the most up to date ones and they can get that off the website, www.irs.gov. I would also appreciate a link to ASA. It’s www.appraisers.org.
Thank you for your time.