Ninth Circuit Affirms 5% Discount for Partial Interest in Art

The industry’s premier estates, gifts, and trusts resource that features research, planning, and implementation tools on one platform — backed by the nation's leading...

In Robert Grove Stone, et al. v. U.S. (No. 07-17068, 3/24/09), the Ninth Circuit rejected the taxpayer's appeal from the decision of the district court for the Northern District of California. The district court had allowed a 5% fractional-interest discount in valuing the Estate's 50% interest in a 19-painting art collection.

In the lower court, the taxpayer had initially claimed a 44% discount, subsequently lowered to 36%. The Government conceded a 5% discount. In rejecting the taxpayer's appeal, the Ninth Circuit held that the taxpayer did not bear its burden of proof, citing the district court's focus on the taxpayer's appraiser's total lack of experience with the art market and reliance, instead, on discounts for real estate or limited partnership interests.

This case illustrates the difficulty in establishing a significant discount for a fractional interest in art, given the lack of data.

Request Estate Gifts Trusts