Appraisals are not simply someone making an educated guess as to value. True appraisals are based upon: comparative price research, using published international auction records for all works by the artist, dealer’s prices, lists and verbal quotations for other works by the artist, the appraiser's personal knowledge of private transactions concerning the artist’s work and market activities of collectors, dealers, and institutions interested in the artist's works.
An appraisal document is a signed document with images included that establishes the value of your artwork. It is prepared in accordance with the guidelines of the Appraisers Association of America, Inc. and to comply with the Uniform Standards of Professional Appraisal Practice. On August 17, 2006 the I.R.S. established guidelines outlining what standards are accepted as "qualified appraisals" and "qualified appraisers". Gift and estate tax appraisals must be completed by an appraiser who has "earned an appraisal designation from a recognized appraiser organization" and must be "conducted by a qualified appraiser in accordance with generally accepted appraisal standards....consistent with the substance and principles of USPAP"
Appraisal documentation includes a full description of the artwork, images, biographical information on the artist, provenance (when available), an assessment of quality and condition as well as retail, private and/or auction records for comparable artwork.
This type of appraisal reports the amount/value that would be required to replace a work with another of similar age, quality, origin and condition within a reasonable length of time in an appropriate and relevant market. Copies of this type of appraisal can be furnished to your insurance company for your scheduled fine arts policy in case of losses due to fire, theft, damage, flood, etc.
“Fair market value” as defined by Treasury Regulation Sections 1.170A-1(c)(2) and 20.2031-1(b) is "the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts." (According to Technical Advisory Memorandum 9235005 [May 27, 1992], fair market value should include the buyer's premium.) Treasury Regulation Section 20.2031-1(b) continues "the fair market value of a particular item of property includible in the decedent’s gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate. Thus, in the case of an item of property includible in the decedent's gross estate, which is generally obtained by the public in the retail market, the fair market value of such an item of property is the price at which the item or a comparable item would be sold at retail."
Source for Value Definition: Treasury Regulation Sections 1.170A-1(c)(2) and 20.2031-1(b).
Other types of appraisals can be written and tailored for specific circumstances when required for estate taxes, object donation to a recognized museum or institution, collateral, and liquidation of property and forced sales. All appraisals are held instrict confidence. Written appraisals and copies of such are furnished to you and only to you.
Ellery H. Kurtz, AAA - American Art Appraisal