I want to thank Lance Hall from FMV Opinions for his very concise and on point commentary summarizing the Estate of Newberger. The case is short. It is only 7 pages long. However, a summary of the key elements regarding three material pieces of art is very informative. In short when the art appraisers took sales six months after the date of death and made appropriate adjustments back to the date of death the court found the results compelling.
In part the summary commentary by Lance Hall states,
"While it is often tempting for experts to ignore a post-valuation-date sale because the sale was "not reasonably anticipated on the date of death," the sale is not irrelevant. TheNewberger Court was very clear; an expert cannot ignore a sale that took place after the valuation date. When faced with a post-valuation-date sale, the valuation expert must make adjustments for differences in time, economic environment, and asset performance (in the case of an operating company).
Because the IRS's expert considered the sale of the Picasso (which took place some six months after the date of death) and made appropriate adjustments due to the differences in economic conditions, the Court favored the IRS's expert's value. However, because the IRS's expert then ignored changes in economic conditions when valuing the Motherwell and Dubuffet paintings, the Court rejected the IRS's expert and accepted the Estate's value."
I find his commentary to be right on point. This is something that we as appraisers need to recognize. Often appraisers do not consider after valuation date information because it was not "known or knowable at the date of death or the alternative valuation date." This commentary points out that using post valuation date sales can be considered if appropriate adjustments can be made from those sales to the date of valuation.
About the author
Mike Gregory is a professional speaker, an author, and a mediator. You may contact Mike directly at firstname.lastname@example.org and at (651) 633-5311. Mike has written 12 books (and co-authored two others) including his latest book, The Collaboration Effect: Overcoming Your Conflicts, and The Servant Manager, Business Valuations and the IRS, and Peaceful Resolutions that you may find helpful. [Michael Gregory, ASA, CVA, NSA, MBA, Qualified Mediator with the Minnesota Supreme Court]