Federal Estate and Income Tax Issues Affecting Artwork
When artwork is physically located in the United States at the owner’s death, two federal tax regimes may become immediately relevant. First, federal estate tax law may impose an automatic lien on the gross estate and, in some circumstances, expose recipients of certain property to personal liability if the estate tax remains unpaid.1 Second, federal income tax law governs the basis of inherited art, basis consistency reporting and the post-death reporting obligations of estates, trusts and beneficiaries.2 In art market settings, where museums, galleries, consignors, storage providers and buyers often act before state law estate administration and federal tax compliance are fully resolved, these rules can create significant transfer, cus…
