The I.R.S. said its employees “have access to a variety of resources that allow them to stay abreast of changes in the art and collectible markets.”

The battle over the Bardinon Ferraris highlights an increasingly popular tax strategy being used by wealthy families around the world. Art, vintage cars and other collectibles passed down to family heirs are often subject to estate taxes or gift taxes. Yet the values of these trophy assets can often be subjective. So some families are using special appraisers and selective data to value their family heirlooms and lower their tax bill.
The problem has become even more acute in recent years as the prices for fine art, cars and wine have soared, giving families more leeway in valuations.  “A valuation for a painting 10 months ago may not be valid today given what’s happened in the art world and the auctions,” said David A. Handler, a trust and estates lawyer with Kirkland & Ellis who often advises wealthy families on valuing assets.  Mr. Handler said some clients asked him if they could simply avoid disclosing their costly paintings or collectibles to the Internal Revenue Service. “No one wants to pay more than they have to,” he said. “But I tell them, “If you try to hide it, there’s a good chance the I.R.S. will find out.’”  The I.R.S. rules surrounding fair-market value for collectibles are highly technical. The agency has a special panel of experts, called the Art Advisory Panel, that helps it determine values for big-ticket artworks claimed by taxpayers. The panel found that taxpayers were increasingly lowballing their art values.  In 2014, the panel looked at 54 taxpayers with 315 items valued at a total of $251 million. It challenged two-thirds of the valuations. The owners had valued the items at $103 million, but their actual total value was over $180 million, according to the panel’s annual report.  Conversely, rich taxpayers are overvaluing items they give to charity, increasing their deductions. The Art Advisory Panel report said the items it examined, valued at $3.8 million for charitable deductions in 2014, should have been valued at $1.7 million.  Patti Spencer, a trust and estates lawyer in Pennsylvania, said one of her clients gave a collection of dinner plates to a university and valued them at $200,000 for the tax deduction. The I.R.S. challenged the appraisal, and determined the value to be closer to $50,000, said Ms. Spencer, who advises her clients to be thorough and hire top appraisers. NYT

1% Mass fraud in global art market Undisclosed mark-ups by dealers, tax fraud, global money laundering, bribery

Art attorneys say that other dealers and galleries in New York also dealt frequently with Bouvier, representing possible buyers and sellers. And many collectors say they welcome a case that could provide transparency into a multibillion-dollar market that remains largely unregulated and offers little disclosure.

Freeports are massive, maximum-security storage sites often located near airports that allow the rich to store expensive valuables in duty-free zones. There is no customs duty payable when bringing art into the freeports and no sales taxes required when selling a work inside—taxes that could run into the millions of dollars for major works of art.  The freeports have come under scrutiny by regulators in recent years for their secrecy and tax benefits, though Bouvier has always denied that they're used for money-laundering or tax-avoidance.

Bouvier is a central player in the high-end global art market due to his large art-shipping company and holdings in storage facilities known as freeports. He is the largest client of a freeport in Switzerland, and owns freeports in Singapore and Luxembourg.

In the shady world of art, private transactions are amongst the most opaque, which is exactly what this case is about. Bouvier, who takes credit in having built Rybolovlev’s collection into “one of the finest in the world,” admits to having worked with the oligarch for ten years, having sold him forty “major works,” reportedly from artists including Picasso, Gauguin, Degas, and even a controversial Da Vinci. Specifically, Rybolovlev’s family trust (which controls his collection) claims Bouvier defrauded them by taking a broker’s commission of 2% while charging an illegal, and hyperbolic, markup, using offshore companies to disguise his interventions.

The 1% Art Market War

An avid art collector, Rybolovlev decided to spend New Year’s Eve with Sandy Heller, Steve Cohen’s well-known art adviser. As they exchanged war stories, one particular tale made his jaw drop: it was about a beautiful Nude by Italian artist Amadeo Modigliani that Cohen sold for a juicy $93.5 million to a mystery buyer. What Heller didn’t know was that behind the veil of anonymity stood Rybolovlev, fuming internally on that December 31. Rybolovlev had paid his trusted friend and art broker Yves Bouvier $118 million for the piece, more than $22 million above what he just found out the market value should’ve been, including the fee. Not one to sit around, the oligarch went for the jugular, filing a criminal complaint in the Principality of Monaco for fraud and money laundering only nine days later. In what promises to be the biggest art scandal of 2015, Bouvier was ambushed by eight police officers who took him into custody this February, tricked by Rybolovlev himself as they were set to discuss payment terms for a masterpiece by Mark Rothko. He’s currently out on bail.

The criminal complaint received on January 12, 2015 by Monaco’s Palais de Justice, and was confirmed by source close to the matter. While Bouvier may not be a household name in the U.S., the accusations and ensuing arrest reverberated across the European art market, where Bouvier runs a set of luxury warehouses across Geneva, Luxembourg, and Singapore where the world’s billionaires store their art, along with jewels, fine wines, and other luxury goods legally in tax-free zones.  Bouvier is accused of fraud and complicity with money laundering along with an accomplice, Tania Rappo, and a third person who hasn't been immediately identified according to Monaco General Prosecutor Jean-Pierre Dreno, who didn't respond to Forbes’ requests for comment. The embattled Swiss is out on bail, set at €10 million and to be paid in three installments, and is ready for war.

Recently Attributed Leonardo Painting Was Sold Privately for Over $75 Million
http://artsbeat.blogs.nytimes.com/2014/03/03/newly-attributed-leonardo-painting-was-sold-privately-for-over-75-million/