The Canadian government offers a tax incentive to encourage the donation of art from private collections to public institutions, a practice that is similarly followed in the United Kingdom and the United States. On one hand, the public receives access to artwork that they might otherwise never see, and on the other hand the individuals or corporations receive a tax break for donating the works. The Canadian Cultural Property Export Review Board, in its role as an independent administrative tribunal among other functions, upholds a mandate to certify the cultural property for income tax purposes. The Board determines the fair market value of art to be donated by either the sales comparison approach or the cost approach, both of which are outlined on the Board’s website.
The purpose of the tax certification process is to “encourage[ ] the transfer of cultural property from private hands to the public domain.” In order to qualify for the tax certification, the Board must determine whether the work is of “outstanding significance, due to its close association with Canadian history, its close association with national life, its aesthetic qualities, its value in the study of the arts, or its value in the study of the sciences; and the object is of such national importance that its loss to Canada would significantly diminish the national heritage.”
The incentivesgranted to successful applicants include “exemption from capital gains tax on the certified cultural property; and non-refundable tax credits for the full fair market values of the certified cultural property.”
How is cultural property actually appraised? The story below raises issues of provenance, the qualification of experts and the contentious nature of the appraisal of art.
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On January 26, 2013, David Baines of the Vancouver Sunreported that eighteen sculptures (the “Collection”) donated to the Museum of Vancouver – terracotta studies of body parts – which had previously been attributed to Michelangelo (1475-1564) and Benvenuto Cellini (1500-1571) by art historians, were in actuality made by Dutch sculptor Johann Gregor Van der Schardt (1530-1591) in the late sixteenth or seventeenth century. The sculptures had been put up for auction by the Museum of Vancouver at Sotheby’s in January, Lot 354, and were featured as a part of Old Masters Week.
Measuring between 7.7 and 21 centimeters, Sotheby’s catalogue described the sculptures as “studies after anatomical elements seen in famous monuments sculpted by Michelangelo Buonarotti. The practice of making copies … was central to the education and stylistic development of artists of the Renaissance; these artists also learned by copying their immediate predecessors and contemporaries, particularly the works of great masters.”
Sotheby’s website reveals that they were most likely acquired by Paul von Praun (an important art collector) in the late 1500s directly from the estate of Van der Schardt. After changing several hands they were then sold to J. Wolff from Montreal by Christie’s London in 1938. Wolff’s twin sons, Paul and Peter LeBrooy, inherited the terracotta sculptures in the 1950s, nine pieces each.
As CBC News reports, while in possession of the LeBrooy brothers, the sculptures remained virtually unstudied for years, until some art historians began suggesting that they might be the works of Michelangelo himself. Sometime after, the brothers contacted experts in hopes of having the sculptures attributed to Michelangelo. Later and for years, the works were promoted and toured internationally as Michelangelo’s studies. Paul LeBrooy even authored a book on the topic titled Michelangelo Models: Formerly in the Paul von Praun Collection (1972).
The ensuing controversy making headlines in Canada is centered on the appraised value of the collection. That is, the donation of the sculptures by Corporate House (a financial group) to the Museum of Vancouver, once valued at about $31 million, had also resulted in the issuance of $31 million in tax receipts for the company by the Review Board. It was clearly a shock when Sotheby’s appraised the works at a fraction of that amount, valuing nine sculptures from the Collection at $200,000-300,000.
Apparently, as revealed in a radio interview with CBC reporter Jason Proctor, the sculptures had endured a riveting history. The pieces had been put up for sale numerous times since the 1960s, receiving offers ranging from several to about $40 million; they were never sold. As per Proctor, the brothers became estranged over the sculptures and divided the collection into two. Corporate House then offered $18 million for Paul’s nine sculptures on the condition that they were attributable to Michelangelo and that they could be appraised for that value in 1996. However, the attribution to Michelangelo could not be made conclusively, and consequently Corporate House acquired Paul’s set of sculptures in 1998 for an undisclosed amount, on the basis that the sculptures were important, unattributed works of the Renaissance era. Shortly following Peter’s death in 2003, Corporate House purchased the remainder of the nine sculptures, whereupon in 2006 they donated the entire collection to the Museum of Vancouver in return for a tax break.
According to Proctor, when Corporate House approached the Review Board regarding the donation to the Museum of Vancouver, they had contacted every expert eligible to verify the attribution to Michelangelo, but learned that it was not “tenable.” Interestingly, Proctor managed to track down two scholars who had been hired by Corporate House, neither of whom had attributed the works to Michelangelo. One of the scholars even concluded that the sculptures were most likely the works of Van der Shardt but he was specifically asked to forgo writing a report about it.
Proctor reveals that the Review Board rejected the initial valuation made by Corporate House for $55 million and later accepted a second valuation based on independent appraisals, in the total fair market value (as defined by the Board) of $31 million for all eighteen figures. Although the appraisals are not made public, the Vancouver Sun reports that Nancy Noble (CEO, Museum of Vancouver) suspects that the sculptures may have been attributed to Michelangelo given the “enormous valuations.”
Several years after the transfer, in 2012, when the Museum of Vancouver decided that the statues were not a part of their collection mandate and decided to flip them on the market, they approached Sotheby’s. The auction house issued a valuation of $200,000-$300,000 for a portion of the collection, and attributed the studies to Van der Shardt.
The question now is: what happens when tax certificates are issued by the Review Board based on appraisals that are disproportionate to subsequent ‘corrected’ valuations when new information is brought to light? Luckily for Canadians, and less so for Corporate House, based on paragraph 32(5)(b) of the Cultural Property Export and Import Act, the Review Board has the power to “redetermine” the fair market value “at any time,” which would then prompt the Canadian Revenue Agency to re-evaluate tax returns from Corporate House, clearly anticipating situations like this one.
The tax certification application process is an intensiveone. However, as Proctor mused in his interview, if he was able to track down the experts that Corporate House used – one of whom had attributed the works to Van der Schardt earlier on – then should the Review Board have done the same? Currently, the Review Board’s policy on monetary appraisal is that “[r]ecipient institutions/public authorities are responsible for selecting reliable evaluators for donations and should be prepared to stand by the work of the appraisers they have engaged,” further, the onus for providing certificates of authenticity also rests with the applicant.
Sotheby’s Lot 354 from the January sale in New York remains unsold.
*Sources: Department of Canadian Heritage; “Important Old Master Painting and Sculptures: Lot 354” Sotheby’s; “Blockbuster Donation of ‘Michelangelo’ Sculptures Turns into a Multi-Million-Dollar Bust” The Vancouver Sun, January 26, 2013; “‘Michelangelo Models’ Cost Canada Millions in Tax Credits” CBC News, February 20, 2013; “Why Did ‘Michelangelo Models’ Cost Canadians Millions of Dollars in Tax Credits?” CBC News The Current, February 19, 2013; Michelangelo www.michelangelo.com; The J. Paul Getty Museum www.getty.edu/museum; The Museum of Vancouver www.museumofvancouver.ca; Amazon www.amazon.ca.
*The author wishes to thank Jason Proctor and the Department of Canadian Heritage for their assistance in providing additional information, and Dr. Laura Petican for her assistance in editing and feedback on the article.
Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Readers should not construe or rely on any comment or statement in this article as legal advice. For legal advice, readers should seek a consultation with an attorney.
