That is the question. In my answer I will use as an example, antique maps. The answer depends on several factors. How much did you pay for it? Why do you think it’s valuable? Does it have a special history of ownership? Do you want to sell it? Do you want to insure it? Is it part of an estate being settled? Do you want to donate it to a tax-exempt institution? I Are you familiar with IRS rules for claiming an income tax benefit? Is it a printed map or a manuscript map? What language is used on the face of the map? Is there text on the back of the map? Are you willing to take it out of the frame so the appraiser can see the margins and the back of the map? Such questions should be answered before you leap.
Answers to those questions help determine the need for a documented appraisal and its’ not inexpensive cost. Maybe I can help you understand the process. First – let’s get down to a basic issue. This blog is about things like maps, books, prints and other items generally called collectibles; it is not about fine arts, land, stocks and bonds, annuities, automobiles and other things requiring an appraisal by an expert in that field. When I appraised antique maps, books and prints I was an expert only in those fields. My qualifications were based on several factors, such as college education that included surveying, nap making and coordinate systems; and several years studying, buying and selling antique maps, prints and books containing maps and prints before I began to appraise such items.
FAIR MARKET VALUE: What is “Fair Market Value”? The definition found in IRS Pub 561 states:
“Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.”
The FMV is to be entered in the appraisal. Generally, if this is for a deduction on your tax form for an item or group of similar items of donated property valued more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. With the exception of fine arts (e.g., paintings) you do not submit the appraisal for collectibles to the IRS unless they ask for it.
INSURANCE: You may insure an item for any reasonable amount, but be prepared. When you submit a claim, the insurance company will probably ask you for evidence of your cost. Lacking that, they may accept an appraisal by a qualified appraiser. And if it is a very high cost, they will seek an independent appraisal. The appraiser will determine the Fair Market Value.
COST: How much will the map appraisal cost? That depends on the purpose of the appraisal. If it is for your personal records or for insurance or sale, the cost could be about $300 TO $4000 per scarce printed map or book for a detailed written appraisal. The appraisal should include a list of recent sales and dealer offerings so you will have assurance the appraisal value is realistic. If it is for donation to a tax-exempt institution (this allows you to deduct a high percentage of the appraised value from your taxable income), that’s another matter. Now you are dealing with the tax code and the IRS. What do government entities want (besides money)? Paperwork – in this case so they can evaluate the claim and the appraiser! This means the appraiser must spend more time, and you must spend more money – perhaps $400 to $500 per printed map. In addition to the time spent, there is one more factor – risk.
FINANCIAL LIABILITY. There is one other problem for the appraiser; he (she) can be held financially liable for the accuracy of the appraisal.
1. Suppose you hire an appraiser, donate the map and claim the appraised value of $10,000. A year later you see the same map on “Antiques Roadshow” and the expert appraiser says the map is extremely rare and worth $20,000. You, the donor, will probably have your attorney contact the appraiser.
- Let’s reverse the circumstances. Suppose the appraised value is $10,000. You donate the map, but the IRS successfully argues it has a fair market value of only $6,000. The IRS will want some of the donor’s money. Again, the donor’s attorney demands the appraiser pay damages because of the faulty appraisal.
- Furthermore, an appraiser who prepares an incorrect appraisal for a tax benefit will likely have to pay a penalty to the IRS when there is a disparity of one hundred-fifty percent or more between the contested values.
SEQUENCE OF EVENTS: The sequence of the appraisal goes like this. You contact the appraiser who asks you to describe the map. You tell him it is a Cram map of Indiana. He tells you it isn’t worth a written appraisal because the map is only worth about $100. If, on the other hand, you tell the appraiser it’s a map of Virginia and has John Smith’s name on it; he will tell you he must see the map because such maps have been reproduced and he must assure the map is a genuine antique map from the 1600s. Also, he may need to look for subtle features not obvious on a photograph to help determine the edition and probable year of the map. Another reason the appraiser will need to see the map is to determine its condition front and back; condition is one of the factors that determine value. Sometimes, the appraiser will be satisfied with photographs, provided the appraisal is not for a tax write-off. One more thing; if you bought the item during the last 12 months and you are donating the map, the IRS will not allow a value greater than the purchase price (one of the entries on the tax form).
The appraiser examines the map; determines the authenticity, edition and date of the map; determines the cartographer, publisher and place published; prepares a condition statement; prepares a list of recent auction sales and dealer catalog prices, or if none is available, a list of comparable sales; determines the Fair Market Value; and submits the written report to you. He may fill-out a draft Form 8283. But it is your responsibility to provide accurate and truthful information, such as the cost. If the item is for donation to a tax-exempt entity, you must keep a copy of the appraisal to back up your claim in event the IRS challenges the value of the donation.
TAX-EXEMPT INSTITUTIONS: Organizations that meet the requirements of Section 501(c) (3) of the U.S. Internal Revenue Code are exempt from federal income tax. These organizations are founded and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational, or other specified purposes. The IRS recognizes more than 30 types of nonprofit organizations, but only those that qualify for 501(c) (3) status can say that donations made to them are tax deductible. The donor needs to be certain the done is qualified.
IS AN APPRAISAL REALLY NEEDED? Finally, you may not need a written appraisal. You don’t need a formal appraisal if you now the item is worth less than $5,000, the IRS lower limit for a formal appraisal. But, you do need to fill out and submit IRS Form 8283.
You could use the internet to help you determine the market value and make your own appraisal. That could be appropriate if you want to sell or insure the item. Be sure the titles are identical; you must compare apples to apples. Even so, there are several different maps whose titles are “Nova Virginiae Tabula”. The overlooked details on the map may indicate it’s not the same map; or those details may indicate its rarity, and enhance its value.
One more remark – most (at least many) dealers will not appraise high value items; it is too time-consuming and full of risks.
DISCLAIMER: This paper is not intended to give you tax advice; that I leave to your tax attorney.
I no longer appraise anything.
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