Estate planning and division of assets; determination of capital gains tax or probate fees
If the estate has some works of fine art, they will need to be equitably divided, sold off and the profits distributed, donated to a charity for a tax deduction, or, a combination of these approaches. The inherited art will first need to be appraised. As per the Canada Revenue Agency rules, fair market value appraisals are done for the determination of estate taxes, and to assist in the division of property. Fair market value appraisals are also done for the determination of capital gains tax or probate fees. A fair market value appraisal is the only type acceptable to the Canada Revenue Agency. The generally accepted meaning of fair market value is "the highest price, expressed in terms of money, that the property would bring in an open and unrestricted market between a willing buyer and a willing seller who are both knowledgeable, informed and prudent, and who are acting independently of each other". (Gifts and Income Tax, Canada Customs and Revenue Agency, P113 (E) Rev. 98).
In matters of divorce the property will have to be divided, liquidated, donated for a tax deduction, or, a combination of these. Canada's provinces define matrimonial property in different ways. Alberta's Matrimonial Property Act refers to marital property as having market value. The generally accepted meaning of market value is "the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and under the assumption that the price is not affected by any undue stimulus".
In cases of business or personal bankruptcy, property is distributed to holders of debt. Collections of artworks are not considered exempt from being attached to pay a debtor's obligations and may need to be sold to satisfy creditors. The property first needs to be appraised and the fair market value established (see the above for a definition).
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The painting on this page is by Helen Galloway McNicoll (1879 - 1915) and is titled Picking Flowers
Image used courtesy of the Library and Archives Canada