Billionaire art collector’s estate settles with IRS

The estate of French art dealer Daniel Wildenstein has reached a settlement with the Internal Revenue Service designating works of art as part of his US estate (and therefore subject to US tax). The Tax Court had previously denied both parties’ motions for summary judgment in February 2020 due to their differing interpretations of the placement of artworks for estate purposes.

The New York family gallery had managed the collection, which was held by the Delta Trust, a Bahamian discretionary trust that Wildenstein established in 1998. Some artwork was shipped from the United States to a duty-free warehouse in Switzerland before Wildenstein’s death. then returned to the United States. These coins were not part of Wildenstein’s estate. The Internal Revenue Service found a tax deficiency based on its view that the property is still located in the United States, even if temporarily located outside the country.

IRS regulations

The stipulated decision issued by the Tax Court last week includes 258 works of art in Wildenstein’s US gross estate for US federal estate tax purposes, resulting in a US gross estate of approximately 31 millions of dollars.

Under the settlement, the estate owes nothing for the tax deficiency or accuracy penalty under section 6662 of the tax code. The IRS had previously assessed more than $200 million owed in deficiency and penalties.

The IRS and the estate agreed to tax additions for non-filing and non-payment under

IRC Section 6651(a)(1) and (2) regarding 90 artworks valued at $2.8 million. The agreement also reduced a prior tax assessment of $98.1 million to an agreed federal estate tax liability of approximately $17 million. The additional tax for failure to file has been reduced by $22 million to $264,139, and the addition for failure to pay has been reduced to $293,488, meaning the estate only owes an additional $557,627. .

The estate has already made payments of $802,000 and $39,034, respectively, in partial settlement of estate tax owed, in March 2019 and August 2020.

Norma D. Ross