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bulk sale, and (3) the gallery buyer’s taking into account the
cost of maintaining the business for a reasonable period.
The Form 706 was examined by the Internal Revenue Service
(IRS). In order to determine whether the correct value had been
reported for the gallery on the Form 706, the IRS Art Advisory
Panel (Panel) examined the collection. The Panel reviewed 227 of
the 464 works of art in the collection, which represented 95
percent of the collection’s undiscounted value as determined by
Sotheby’s. The Panel accepted the values determined by Sotheby’s
for the remaining works of art in the collection. Based upon
this review, the Panel determined that the undiscounted value of
the collection was $36,636,630 rather than the $25,876,630
undiscounted value that had been determined by Sotheby’s. The
Panel determined the collection’s undiscounted value by adding
the undiscounted values that it had determined for each work of
art in the collection.
The Panel determined that the discounted value of the
collection was $22,955,077. In determining this value, the Panel
considered the various discounts that had been applied by
Sidney’s estate. While the Panel did not entirely agree with the
discounts claimed by Sidney’s estate, the Panel did agree that
the application of a blockage discount was appropriate. The
Panel gave the following explanation as to the factors that it
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Last modified: May 25, 2011