Bill,

Here is some of what I discussed during the round-table discussion on
collection disposition at this year's COA convention from an
appraiser's point of view...but first, one correction; a tax write
off cannot be taken for the sale of a collection, only a donation to
an institution that is registered as an educational or non-(not-for)
profit organization.

Donating a collection to a museum/scientific repository is an
iterative process.  First a museum has to show interest in receiving
the said collection.  The collector or family of the collector needs
to contact and discuss the possibility of donating the collection
with the curator/collections manager and have the collection
evaluated (a look-see, not an appraisal) to determine the museum's
interest.  Some collections are well-known enough for this process to
be a matter of formality.

Here is where the collector should have a long and informative
discussion with their heirs so that they fully understand the process
in the event the collector passes on before the collection finds a
new home in a museum.  It's not the most pleasant discussion to have,
but when spending significant time and money amassing a
scientifically important collection, the collector has some hard
choices to make -- donate or sell the collection.  For now, let's say
the donation-route is selected.

Once an interest is shown by the museum, the collection needs to be
appraised at "fair market value".  There is a fair amount of
disagreement as to who can do a valid collection appraisal.  Though
most advanced collectors are more than qualified to place values on
the specimens in the collection, IRS might question an appraisal that
is not done by someone who makes at least a greater portion of their
living in the sale and marketing of the collectable -- shells in our
case.  There is no certification for the appraisal of shell
collections as in the art and antiques world, and those
certifications are not given by IRS, but private organizations.

There is no way to predict whether IRS will flag a donation for an
audit, but having the appraisal completed with all the "t's" crossed
and "i's" dotted reduces the possibility of an audit.  This includes
a more detailed itemization of the shells and species in the
collection as opposed to just assigning lot values.  Yet, there are
many other variables that will trigger an audit that has nothing to
do with the appraisal, but with how the collector's estate is set
up.  You need to work closely with your tax consultant to maneuver
the intricacies of estate planning.  It should be noted that
collections with a value under $5,000 do not need an appraisal.  The
value of an average collection containing a few hundred or more
shells ranging from common to rare will almost always have a value
higher than this break-point.

A museum cannot recommend an appraiser.  Most collection managers can
offer the donator a short list of qualified appraisers.  It is up to
the donator to determine the process, price and feasibility of hiring
one or another appraiser.  The fee(s) associated with an appraisal
must be done based on time and not a percentage of the collection
value.  The appraisal of a collection that is catalogued and
organized will take less time and cost less than one that is in need
of curation.  Ask the appraiser what they will do for their fee.  You
will find a great disparity between the services of
appraisers.  Cheap is not always the best route.  An experienced
appraiser while give you the necessary paperwork and sign the
necessary IRS form to comply with the regulations for a donation.

A third and very important aspect of a donation to consider is that
some (most) museums will not accept a collection for donation unless
a gifting of money comes with the collection to offset the cost of
curating and incorporating it into their larger museum
collection.  The bottom line is that making a donation to a museum
does not come cost-free.  The appraisal fee and possible cash
donation has to be evaluated by the donator.  When you donate a
collection the collector/estate of the collector will not make
money.  What the donation will do is add greatly to the museum's
holdings, which then help support the museum's reason for
existence.  The name collector is almost always incorporated into the
museum's data tag, which then carries on the memory of the collector.

Of the dozens of appraisals that I have handled since the 1970's, I
know of none of my clients that have had the appraisal questioned by
IRS.  And many of these collections were of significant size (25,000
or more shells/lots).

Your final question as to how does one receive the best financial
return for the collection?  Selling it yourself is probably the only
way, and that assumes a break-even proposition or loss or the
original purchase price since there is a good possibility that the
current market value of a number of the shells that were purchased at
high prices may have dropped somewhat if not drastically.  The other
aspect is whether the collector or collection owner has the time,
means and desire to sell the collection piece-meal.

If a dealer-collector makes an offer to buy a collection, you can
expect the offer(s) to be significantly less than the current market
value of the collection.  This often causes sticker shock to the
collector, but if the collection is part of an estate, the executor
is usually willing to let a collection go for sale as a whole since
this is the fastest way for the collection to part the estate.

Having said all this, it is up to the collector/family/heirs of the
collection to make decisions to donate/sell the collection as early
as possible.  Then when the time comes, there is less pressure to
decide the disposition of the collection.

Regards,
Rich
~~~~~~~~~~~~~~~~~~~~~~~~
www.worldwideconchology.com
~~~~~~~~~~~~~~~~~~~~~~~~

At 01:22 PM 10/28/2010, you wrote:
>How easy is it to take a tax deduction so you are able to withstand an
>audit?  I have heard that in order to do it you need to:
>
>    - learn what credentials are needed for an appraiser (not standard, no
>"directory of appraisers", etc.),
>    - find an appraiser willing to appraise the collection (many are busy
>and do not "enjoy" appraisal work),
>    - pay the appraiser (fee can consume the value of the collection),
>    - then fill out the tax forms needed to claim the deduction (Which ones?
>Any guidance available?).
>
>Has anyone actually gone through the process to obtain a tax write-off for
>the sale of a collection?  Was it worth the cost in time and money?
>
>When this topic comes up, we tend to hear from the people who want the
>collection (e.g. museums, other advanced collectors, dealers, COA convention
>auction chairperson, etc.) who present the topic from their perspective.
>What is the perspective of someone with a collection needing to make a
>decision?  If you want the best financial return for the collection, how do
>you proceed and why?
>
>Bill Fenzan
>Norfolk, VA
>
>----- Original Message -----
>From: "Charles Sturm" <[log in to unmask]>
>To: <[log in to unmask]>
>Sent: Thursday, October 28, 2010 9:17 AM
>Subject: Re: [CONCH-L] Disposing of collections
>
>
>>They can also consider donating them to a museum. Most museums do not have
>>the funds to purchase collections, however, the donor can deduct the value
>>on their tax returns.
>>
>>I have helped incorporate several collections into the Carnegie Museum's
>>collection. All were donated, most donors did not take a tax write off.
>>The donors just wanted to know that the collection would be cared for and
>>that it would be used by others.

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