Estate Contests IRS Challenge to Picasso, Other Paintings

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Dec. 22 — The U.S. Tax Court found that the estate of a deceased Florida taxpayer was partially correct in its valuation of three paintings, including one by famed painter Pablo Picasso, that were priced at more than $6 million (Estate of Newberger v. Commissioner, T.C., No. 26241-13, T.C. Memo. 2015-246, 12/22/15).

Judge Maurice B. Foley ruled Dec. 22 that the estate of Bernice Newberger, who passed away in July 2009, had an untitled painting by Robert Motherwell appraised correctly at $800,000, and a painting titled “Element Bleu XV” by Jean Dubuffet appraised correctly at $500,000 for tax purposes.

The estate timely filed a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, in October 2010, reporting the values relating to a painting by Picasso titled “Tete de Femme,” as well as the Motherwell and Dubuffet paintings.

Picasso Sold

In November 2009, the estate sought appraisals of the estate's property, and in December of the same year agreed to sell the Picasso at a London auction. The estate listed the Picasso, which Newberger acquired in 1981 for $195,000, as having a $5 million date-of-death value. The painting sold in February 2010 for nearly $13 million, and the estate reported on its Form 706 the $5 million death value.

The Motherwell, which was acquired by Newberger in 1969 for $8,000, was reported on the estate's Form 706 as having a $450,000 date-of-death value.

The Dubuffet, bought by Newberger in 1982 for $40,000, was listed on the estate's Form 706 as having a $500,000 date-of-death value.

Deficiency Notice

The Internal Revenue Service issued a deficiency notice to the estate in August 2013, determining that the Picasso, Motherwell and Dubuffet had date-of-death values of $13 million, $1.5 million and $750,000, respectively. The estate subsequently petitioned the Tax Court in November 2013.

At the Tax Court, the estate asked the court to disregard the Picasso sale price as a “fluke,” contending that the sale isn't relevant because it couldn't have been reasonably anticipated at the date of death.

Foley found that the estate experts' failure to consider the sale of the Picasso rendered the valuation of the painting “wholly unreliable,” and agreed with the IRS valuing the painting at $10 million.

However, regarding the other two paintings, Foley found that the IRS failed to make market adjustments, and agreed with the estate's valuation of the Motherwell painting at $800,000 and the Dubuffet's appraisal of $500,000.

John Paul Barrie represented the Newbergers. Alexander R. Roche represented the commissioner.

To contact the reporter on this story: Matthew Beddingfield in Washington at
To contact the editor responsible for this story: Cheryl Saenz at

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