Canyon explores themes presented in Rembrandt’s The Abduction of Ganymede (1635), which tells the story of Zeus assuming the form of an eagle to abduct a boy named Ganymede. In the painting, Ganymede is depicted as terrified and crying as he hangs from the eagle’s beak with his naked buttocks facing the viewer. With Canyon, Rauschenberg placed the eagle on the bottom of the canvas with wings spread flying outward towards the viewer. A rope dangling from the canvas holds a pillow tied in the center that some say references the young Ganymede. (Kinsella 2012).

The Bald and Golden Eagle Protection Act & Estate Tax

Enacted in 1940, the Bald Eagle Protection Act (later amended to include golden eagles) forbids the possession, sale, purchase, or barter; or offer to sell, purchase, or barter; in addition to the transportation, export, or import in any manner any bald eagle or golden eagle, alive or dead. (16 U.S.C. § 668(a), (b)). The penalty for such action is $5000 or a year in prison. Under the Act, a person may possess or transport but cannot sell an eagle that was lawfully taken prior to June 8, 1940 (the date of enactment). (16 U.S.C. § 668). Transportation of a lawful pre-1940 eagle requires a permit from the Fish and Wildlife Service. (See 50 C.F.R. § 22.21).

Rauschenberg acquired the eagle in Canyon from a colleague, Sari Dienes, who found the eagle abandoned with other possessions from Dienes’ deceased neighbor, a former Teddy Roosevelt Rough Rider. (Kotz 2004, 96); (Melbinger 2015, 246). As the eagle was likely first taken from its habitat before the enactment of the Act, Rauschenberg’s acquisition of the eagle did not violate the BGEPA. The safe harbor provision for pre-1940 eagles also enabled Sonnabend, an owner of the work, to possess and to transport Canyon to exhibitions.

The value of Canyon became controversial only with the disposition of the Sonnabend estate and the calculation of the estate tax liability. Estate tax is a tax on the transfer of the taxable estate of a decedent, in this case Ilena Sonnabend. (26 U.S.C. § 2001). The taxable estate includes the decedent’s gross estate, the property owned at death. (26 U.S.C. § 2031(a)). In order to determine the amount of tax owed, the estate must calculate the property’s fair market value, which is the price at which the item would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. (26 C.F.R. § 20.2031-1(b)). The relevant market is one in which the item “is most commonly sold to the public.” (26 C.F.R. § 20.2031-1(b)). Art appraisers hired by the estate determined that the hypothetical buyer and seller would be aware of the BGEPA’s prohibition on the sale of eagles, and thus a market sale could not legally occur, rendering the fair market value of Canyon as zero. The IRS, however, based its appraisal on a hypothetical billionaire living in China, who may wish to purchase Canyon even with the legal risk of operating on an illicit market. (Kinsella 2012).

If a tax return that has been selected for an audit includes an appraisal for a single work of art valued at $50,000 or more, the case is referred to the Art Appraisal Service, which will then review the appraisal and refer the case to the Art Advisory Panel. (IRM 4.48.2.1). The Art Advisory Panel makes a recommendation on the claimed value, which then becomes the position of the IRS upon review by the Art Appraisal Service. (IRM 4.48.2.1). In this particular case, the Art Advisory Panel, considering comparable sales of works by Andy Warhol and Jasper Johns, estimated the value of Canyon at $65 million, which the IRS then accepted as its formal position. One Art Advisory Panel member said that the group evaluated Canyon “solely on its artistic value, without reference to any accompanying restrictions or laws.” (Cohen 2012). According to one panelist, Canyon is a “stunning work of art and we all just cringed at the idea of saying that this had zero value. It just didn’t make any sense.” (Cohen 2012).

Appraisals by the Estate and IRS: A Better Value?

The legal framework surrounding the valuation of Canyon seems to restrict the appraisal to only one outcome. However, further consideration of the context of the object including the historical background of Rauschenberg’s work and of Canyon itself offers potential alternatives to the two extreme valuations of $0 and $65 million.

Comparables & Art Historical Context

In arriving at the $65 million valuation, the IRS referred to comparable sales by Andy Warhol and Jasper Johns, but the reliance on these comparables reflects a rather simplified view of the art historical context of Rauschenberg’s Canyon. (Melbinger 2015, 255). The IRS specifically referred to the sale of Jasper John’s Flag (1955) valued at $10-15 million and Andy Warhol’s Green Car Crash (1963), which sold at Christie’s in 2007 for $71.7 million, a record for Warhol at that time. The IRS also mentioned the prices of Rauschenberg’s Overdrive (1963) and The Tower (1957), $14.6 million and $12-$18 million respectively, as the valuation floor for Canyon. (Melbinger 2015, 256). The IRS argued that Canyon’s value was of greater artistic quality than those other Rauschenberg pieces without explaining the reasoning leading to this assessment.

While works by Johns and even other Rauschenberg works sold between $10-18 million, the IRS’s choice to rely on the high price of Warhol’s Green Car Crash at $71.7 million appears misguided. Appraisers routinely use comparables to predict the future market price for a work. The greater the similarities between the works in medium, date of sale, artist, and other factors correlates with the accuracy of the comparable. Warhol’s Green Car Crash, a silkscreen painting, is not sufficiently similar in material to Rauschenberg’s mixed media combine sculpture to serve as a useful comparable. The IRS also did not need to rely on this outlier sale by Warhol while sufficient sale data of Rauschenberg’s own works were available, offering more legitimate comparables. Similarly, while both Warhol and Rauschenberg shaped the Pop Art movement and shared a similar devotion to the “ordinary object,” Warhol dominated (and still continues to do so) the art market, resulting in such high prices like that of Green Car Crash. Warhol also took the “anti-art” sentiments of the Pop Art movement even further with The Factory, which produced works where the artist’s hand was removed from the painting with the repetition of the same mechanically produced commonplace image. (Livingstone 1996). Therefore, a more precise consideration of Rauschenberg and Canyon’s place in the art historical context would have resulted in a more accurate valuation on behalf of the IRS.

Retained Property Interests & Provenance

The zero-valuation reached by the estate ignored the property interests that the estate still retained in Canyon, even under the BGEPA, such as the ability to possess, transport, and donate the work. Donating a work of art to an art museum may qualify for a charitable contribution deduction for the donor. (See 26 U.S.C. § 170). While the amount of the deduction depends on the fair market value of the donation, case law permits a charitable contribution deduction for the donation of a work covered by the BGEPA. In Sammons v. Commissioner, the taxpayers had sought a charitable contribution deduction for a donation of Native American artifacts that incorporated eagle feathers. The IRS initially denied the deduction arguing that permitting such a deduction would be tantamount to subsidizing an illegal transaction through tax benefits. The Ninth Circuit disagreed and stated that allowing the deduction for the museum donation of the eagle artifacts would not frustrate any national or state policies of protecting endangered bird species. (Sammons, 838 F.2d at 336).

Hinting at other potential property interests, Canyon’s provenance does not reflect a history of various market transactions. While the details surrounding Sonnabend’s acquisition of Canyon is unclear, Canyon primarily remained in Sonnabend’s possession for most of the period between its creation and Sonnabend’s death. Consideration of the object’s provenance and its relative absence of any market sales could have provided a clue to other property interests beyond the market sale prohibited by BGEPA.

The Illicit Market & Canyon as Art

In its appraisal of Canyon, the IRS relied upon the existence of an illicit market, which it has addressed in previous cases. For example, the IRS used the illicit market for assessing the fair market value of art objects stolen by the decedent while serving in the U.S. Army in Europe during World War II. (I.R.S. Tech. Adv. Mem. 91-52-005). Similarly, the IRS found that the fair market value of illegal drugs in possession of the decedent at the time of his death was the retail street value because the illicit street market was the particular market for that type of property. (I.R.S. Tech. Adv. Mem. 92-07-004).

However, this reliance on the illicit market to value Canyon mischaracterizes this work and places too much emphasis on one feature, the eagle, while ignoring the rest of the work. The property in the examples above were knowingly obtained illegally by the taxpayer (stealing art, selling illegal drugs). However, Rauschenberg did not obtain the eagle or create Canyon illegally. More importantly, the object itself as an entire sculptural work that combines many different materials is not an illicit object. In the Sonnabend case, the only illegal activity is the hypothetical sale prompted by the estate tax claim. Forcing the taxpayer to engage in illegal activity, even hypothetically, contradicts good governance of the law. (See Rhodes 2012, 74). A more legitimate exchange besides a market sale may have served as the more appropriate assessment of Canyon’s value as a sculptural work.

Whose value?

As seen with Canyon, the value of art can be elusive, difficult to pin down, and unique for every viewer. Preferring the physical over the metaphysical, the law tends to focus on the “physical essence” of the art object, especially the materials, when establishing a framework for value. (Edwards 1991, 13). For example, an artist, who has donated a work that she created to a charity, can deduct only the cost of the materials and not the appraised value of her work for a charitable contribution deduction. (26 U.S.C. § 170(e)). In comparison, art history tends to value a work based on multiple factors. For some, the value of art is the time and effort put into the work, or the appreciation of the work by other people. (Zastrow 1977, 28). Others consider the fame of the artist, the uniqueness of the painting, the age and physical condition of the work, and the context of the work within the oeuvre of the artist. (Edwards 1991, 10). Paintings can also have emotional value, especially for the artist or even a sacred value for the viewer when it is hung on a museum wall. (Edwards 1991, 13); (Valentine 1982, 38). From a more academic perspective, art history considers value as the product of artistic achievement in the handling of materials to convey meaning. (Lopes 2011, 530-32). These different values seem to operate at odds with each other, as the law is preoccupied with the physical material while art history considers the non-physical. While value may be in the eye of the beholder, perhaps the only way to understand an object’s value comprehensively is to consider it from all possible perspectives and contexts.

In 2012, the estate and the IRS reached a deal where the estate agreed to donate Canyon to a U.S. institution in exchange for the IRS dropping the tax review. Ultimately, the estate decided to donate Canyon to the Museum of Modern Art in New York City. Rauschenberg intended Canyon to engage the observer as a collaborator. Collaboration between the different parties involved in the Sonnabend estate ultimately contributed to a resolution of this legal dilemma.

Bibliography

Cohen, Patricia. 2012. "Art's Sale Value? Zero. The Tax Bill? $29 Million." The New York Times, July 22.

Edwards, M.D. 1991. "How Much is That Painting Worth? An Essay on the Value of Art." Art Education 44 (1).

Kim, Hannah. 2014. "Diving into Rauschenberg's Canyon." Inside/Out MOMA, January 24.

Kinsella, Eileen. 2012. "Sonnabend heirs, IRS dispute value of Canyon." Artnews, May 1.

Kotz, Mary Lynn. 2004. Rauschenberg/Art and Life. New York: Harry N. Abrams.

Livingstone, Marco. 1996. Pop Art. Grove Art Online. Accessed September 26, 2017. http://www.oxfordartonline.com/subscriber/article/grove/art/T068691.

—. 2003. Rauschenberg, Robert. Grove Art Online. Accessed September 26, 2017. http://www.oxfordartonline.com/subscriber/article/grove/art/T070888.

Lopes, Dominic McIver. 2011. "The Myth of (Non-Aesthetic) Artistic Value." The Philosophical Quarterly 61 (244).

Valentine, Catherine. 1982. "The Everyday Life of Art: Variation in the Valuation of Art Works in a Community Art Museum." Symbolic Interaction 5 (1).

Zastrow, Leona M. 1977. "Two Native Americans Speak on Art Values and the Value of Arts." Journal of American Indian Education 16 (3).

16 U.S.C. § 668.

26 U.S.C. § 170.

26 U.S.C. § 2001.

26 U.S.C. § 2031.

26 C.F.R. § 20.2031-1.

50 C.F.R. § 22.21.

Sammons v. Commissioner, 838 F.2d 330 (9th Cir. 1988).

I.R.S. Tech. Adv. Mem. 92-07-004 (Feb. 14, 1992).

I.R.S. Tech. Adv. Mem. 91-52-005 (Dec. 27, 1991).

Art Appraisal Services Overview, IRM 4.48.2.1 (Dec. 14, 2010).

Melbinger, Charlotte, The Sonnabend Estate and Fair Market Valuation of Canyon, 163 U. Pa. L. Rev. Online 239, 246 (2015).

Rhodes, Anne-Marie, Valuing Art in an Estate: New Concerns, 31 Cardozo Arts & Ent. L.J. 45 (2012).