The Internal Revenue Service has dropped its claim against the estate of Ileana Sonnabend over 'Canyon', a three-dimensional collage by Robert Rauschenberg that was owned by the late art dealer. The work includes a stuffed bald eagle, which (as we saw in the Monthly Update back in May 2012) created problems for Sonnabend during her lifetime, as it is illegal in the US to possess or traffic in live or dead specimens of the national avian emblem.
Sonnabend obtained a permit both to own the work and to lend it to the Metropolitan Museum in New York, but her executors faced a massive federal and state tax bill which included an assessment based on a valuation of 'Canyon' at US$65 million. This resulted in tax of US$29.2 million on the Rauschenberg work alone, plus an 'undervaluation penalty' of 40%. Sonnabend's estate sued the IRS, arguing that the value of the work is $0, there being no legal market for the piece; they pointed out that selling it to pay the tax bill could put the executors in prison. The IRS initially took the position that the valuation should be determined according to what the work would sell for on the black market, suggesting that a hypothetical Chinese billionaire might be willing to buy it secretly, but has since backed down and agreed to let the estate donate the work to the Museum of Modern Art. The estate will not be able to claim a charitable deduction for the gift – which is at least consistent a valuation at nil.
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