Thompson: The Relationship between Tax Deductions and the Market for Unprovenanced Antiquities

+ 2(,1 1/,1(Citation: 33 Colum. J.L. & Arts 241 2009-2010

Content downloaded/printed from HeinOnline (http://heinonline.org)Wed Dec 4 16:42:25 2013

-- Your use of this HeinOnline PDF indicates your acceptance of HeinOnline's Terms and Conditions of the license agreement available at http://heinonline.org/HOL/License

-- The search text of this PDF is generated from uncorrected OCR text.

-- To obtain permission to use this article beyond the scope of your HeinOnline license, please use:

https://www.copyright.com/ccc/basicSearch.do? &operation=go&searchType=0 &lastSearch=simple&all=on&titleOrStdNo=1544-4848

The Relationship between Tax Deductions and the Market forUnprovenanced Antiquities

Erin Thompson *

INTRODUCTION

This Note examines the relation between the market for unprovenancedantiquities' and Congress' allowance of tax deductions for donations of in-kindgifts to nonprofit organizations. Part I lays out the current rules on charitabledeductions. Part II surveys the antiquities market, arguing that the majority ofunprovenanced antiquities sold in the American market during the last few decadeswere looted and illegally exported from their countries of origin in order to feedthis market. Part III begins with a discussion of several cases of donated antiquitiesand then moves to a general suggestion that the current charitable deduction rules,at best, fail to reduce looting and, at worst, encourage the purchase of lootedantiquities. The Note concludes with a proposal for conditioning the availability ofa deduction on the presence of satisfactory provenance information and adiscussion of the impact this reduction in the availability of deductions might haveon the market for antiquities, scholarship and the fate of antiquities themselves.

I. CURRENT RULES FOR CHARITABLE DONATIONS

Congress has allowed tax deductions for donations to charitable, religious,educational and similar nonprofit organizations since 1917. A 1938 report of theHouse Committee on Ways and Means explained that the loss of tax revenuecaused by charitable deductions is compensated by the "relief from financialburden which would otherwise have to be met by appropriations from public funds,and by the benefits resulting from the promotion of the general welfare." 2

* Ph.D., Department of Art History and Archeology, Columbia University; J.D. Candidate,Columbia Law School, 2010. The author thanks Alex Raskolnikov for his valuable guidance.

1. The term "antiquity" is used in this paper according to the accepted international definition ofartifacts over 100 years old (Convention on the Means of Prohibiting and Preventing the Illicit Import,Export and Transfer of Ownership of Cultural Property, Nov. 14, 1970, 823 U.N.T.S. 231, Art. 1(e)[hereinafter 1970 UNESCO Convention]), but also in accordance with the layperson's use of the term,in that the majority of the artifacts I will discuss were produced before 0 C.E. For an explanation of myuse of the term "unprovenanced," see discussion infra Part II.

2. H.R. Rep. No. 1860, 75th Cong., 3d Sess. (1938). For an analysis of this and other policyrationales for the charitable deduction, see David Schizer, Subsidizing Charitable Contributions:Incentives, Information and the Private Pursuit of Public Goals (Columbia Law and Econ., Working

241

COLUMBIA JOURNAL OF LAW & THE ARTS

The Committee on Ways and Means was correct in stating that the benefits ofcharitable deductions need to be balanced against the burdens, since thesedeductions have a significant impact on tax revenue. In 1999, approximately$125.8 billion was deducted for charitable gifts on approximately 35.5 millionindividual returns, with deductions for non-cash gifts accounting for approximately$38.3 billion of that total.3 In 2004, 6.6 million individual returns claimed non-cash gifts amounting to $37.2 billion.4

Given their large impact on tax revenue, the advisability of charitable deductionshas often been evaluated in terms of effectiveness, scope 5 and potential for abuse.6

These discussions have led to many modifications of the statute and regulationsgoverning charitable deductions. Accordingly, a charitable transfer must nowsatisfy a complex set of rules in order to result in a deduction. These rules aregrouped into three general requirements: the transfer must (1) go to a qualifiedrecipient,7 (2) exhibit the proper donative intent (i.e., not be in exchange for goodsor services)8 and (3) consist of cash or qualified property.9 It is the thirdrequirement which is, broadly speaking, addressed in this paper.

Paper No. 327, 2008), available at http://papers.ssm.com/sol3/papers.cfm?abstract-id=1097644.3. David Campbell & Michael Parisi, Individual Income Tax Returns, 1999, 21 STAT. INCOME

BULL. 9, 12 (2001).4. Janette Wilson & Michael Strudler, Individual Noncash Contributions, 2004, 26 STAT.

INCOME BULL. 77 (2007). The most common non-cash gifts were corporate stock ($15.1 billion),clothing ($6.3 billion), and household items ($3.5 billion). Id. at 78-79.

5. "Most 501(c)(3) charities now benefiting from the charitable deduction are neither charitable,in the sense of relying mostly on altruistic gifts, nor providers of public goods." ANDREWCHAMBERLAIN & MARK SUSSMAN, TAX FOUNDATION, CHARITIES AND PUBLIC GOODS: THE CASE FORREFORMING THE FEDERAL INCOME TAX DEDUCTION FOR CHARITABLE GIFTS 8 (2005),http://www.taxfoundation.org/files/srl37.pdf.

6. For example, there are many rulings concerning taxpayer attempts to purchase works of art inlarge quantities at wholesale prices and then donate them with retail price valuations. See, e.g., Rev.Rul. 79-256, 1979-2 C.B. 105. See generally Robert Anthoine, Deductions for Charitable Contributionsof Appreciated Property-The Art World, 35 TAX L. REv. 239 (1980); Conrad Teitell, CharitableDonations ofArt Works: The Special Considerations Involved, 51 J. TAX'N 326 (1979).

7. I.R.C. § 170(c) (2006).8. Id. See generally James Colliton, The Meaning of "Contribution or Gift" for Charitable

Contribution Deduction Purposes, 41 OHIO ST. L.J. 973 (1990); Richard D. Hobbet, CharitableContributions-How Charitable Must They Be?, II SETON HALL L. REV. 1 (1980); Joseph V.Sliskovich, Charitable Contributions or Gifts: A Contemporaneous Look Back to the Future, 57 UMKCL. REV. 437 (1989). Note that a donation may result in a deduction even if the donor's intent is that thedonation will result in benefits to the donor's reputation: Rev. Rul. 68-658, 1968-2 C.B. 119 (Situation2) (allowing deduction for an art gallery's donation of artworks to a museum, made for the purpose ofadding to the gallery's prestige and enhancing the value of works by the same artists, whom the galleryrepresented); see also Rev. Rul. 79-9, 1979-1 C.B. 126 (revoking Rev. Rul. 68-658, but making noreference to this holding); McLennan v. United States, 24 Cl. Ct. 102, 91-2 USTC 1 50, 447 (1991),aff'd, 994 F.2d 839 (Fed. Cir. 1993) (allowing deduction for a landowner's donation of scenic easement,made in order to protect value of property and generate deduction).

9. I.R.C. § 170(e)(3) (2006). Note that charitable transfers, even if they satisfy all requirements,are deductible only to the extent they do not exceed a specified percentage of the taxpayer's income inthe year of payment (carryover being allowed in some cases). This paper will assume that thisdeductible amount does not enter into the donor's considerations. For percentage limitations ondeductions, see BORIS 1. BITTKER & LAWRENCE LOKKEN, FEDERAL TAXATION OF INCOME, ESTATESAND GIFTS 135.3; I.R.C. §§ 170(b)(1)(A)-(B) (percentage limitations for individuals) and (b)(2)(A), (C)

242 [33:2

TAX DEDUCTIONS AND UNPROVENANCED ANTIQUITIES

A. SPECIAL CONSIDERATIONS FOR THE DONATION OF ART

While even gifts of cash or easily valued assets such as stock are governed by acomplex set of rules, much more intricate rules govern deductions for donations ofart or artifacts. I will discuss two such areas of rule-making concerning gifts of art:valuation10 and the related use rule.1

1. Valuation

Since donors of artwork have often been criticized for attempting to increasetheir deduction by overvaluing their donations, 12 the IRS has a number of rules andprocedures to control the valuation of donated art. In general, the IRS allows adonor to deduct an amount equal to the donated property's fair market value at thetime of the gift.13 However, the application of the concept of "fair market value" isdifficult for rare or unique artifacts such as antiquities.

Fair market value is not the property's cost; 14 rather, in the classic and oft-repeated formulation, it is "the price at which the property would change handsbetween a willing buyer and a willing seller, neither being under any compulsion tobuy or sell and both having a reasonable knowledge of relevant facts.""s Themarket for this imagined transaction is the market "in which such item is mostcommonly sold to the public." 1 6 As for the "reasonable knowledge of relevantfacts" standard, 17 an IRS ruling has attempted to clarify that:

(percentage limitations for corporations).10. Treas. Reg. § 1.170A-l(c)(1).11. I.R.C. § 170(e)(1)(B) (2006).12. See William M. Speiller, The Favored Tax Treatment of Purchasers of Art, 80 COLUM. L.

REV. 214, 238-40 (1980); Robert Anthoine, Deductions for Charitable Contributions of AppreciatedProperty-The Art World, 35 TAX L. REV. 239, 276 (1980) ("[T]here appear to be some alleged expert[art appraisers] who are prepared to give what may be referred to as extravagant appraisals."); Alan L.Feld, Artists, Art Collectors and Income Tax, 60 B.U. L. REV. 625, 651 (1980) ("We should be surprisedif donors [of art] failed to give themselves the benefit of any doubt-and occasionally more.").

13. Treas. Reg. § 1.170A-l(c)(1). There is an important exception which limits the deductionamount for dealers and some collectors. If the taxpayer would have generated ordinary income or short-term capital gain if he or she had sold the property for its fair market value instead of donating it, theotherwise deductible amount is reduced by the amount of this income or gain. I.R.C. § 170(e)(1)(A).That is, the deduction in these cases is limited to the taxpayer's adjusted basis in the property. SeeTreas. Reg. § 1.1 70A-4(d) Ex. I (ordinary-income property). The rule applies to gifts of capital assetsheld for less than one year and to art in a donating dealer's inventory (or otherwise held for sale tocustomers in the ordinary course of business). See Lindsley v. Comm'r, 47 T.C.M. (CCH) 540 (1983).Collectors can easily escape this limitation by holding the to-be-donated object for more than one year,thus making it a long-term capital asset whose full fair market value may be deducted. I.R.C. § 1221;Feld supra note 12, at 626 (a "work of art in the hands of a collector will usually meet the capital assetdefinition without difficulty").

14. L.O. 1118, 11-2 C.B. 148 (1923).15. Treas. Reg. § 1.170A-I(c)(2). For the willing-buyer, willing-seller test, see BORIS 1. BITTKER

& LAWRENCE LOKKEN, FEDERAL TAXATION OF INCOME, ESTATES AND GIFTS 1 35.16. Goldstein v. Comm'r, 89 T.C. 535, 544 (1988) (quoting from Treas. Reg. § 25.2512-1). See

also Leibowitz v. Comm'r, 73 T.C.M. (CCH) 2858, 2868 (1997) ("Fair market value is determined inthe market most commonly used by the ultimate consumer, which may or may not be the mostexpensive, since ultimate consumers may simultaneously participate in multiple markets with different

2010] 243


A prospective seller would inform a prospective buyer of all favorable facts in aneffort to obtain the best possible price, and a prospective buyer would elicit all thenegative information in order to obtain the lowest possible price. In this arm's lengthnegotiation, all relevant factors available to either buyer or seller, known to both,provide a basis on which the buyer and seller make a decision to buy or sell and cometo an agreement on the price. 18

Among the hypothetical facts the appraiser is to take into consideration areevents which are "reasonably foreseeable at the date of valuation."l 9

Such formulations of a valuation principle are flexible and leave room for adonor to argue for higher valuations. The IRS controls this impulse of art donorsthrough two mechanisms: various substantiation requirements, including anappraisal, and audits through the IRS Art Advisory Panel.

The first, and most important, way in which the IRS controls valuation isthrough substantiation requirements. A charitable gift must be verified before thedonor can claim a deduction. 20 When the claimed value of the gift is $250 or more,this substantiation must include a contemporaneous written acknowledgment by thedonee organization. 2 1 For a gift worth $500 or more, the donor must include adescription of the property and any other information required by the IRS with thetax return in which the donation is claimed.22 For a gift of property other thanmoney, publicly traded securities or inventory, 23 worth more than $5,000,24 thedonor must obtain an appraisal.25

The IRS has promulgated a detailed set of rules about these appraisals. Theymust be carried out by "a qualified appraiser in accordance with generally acceptedappraisal standards." 26 A qualified appraiser must be certified by a recognizedprofessional appraiser organization or meet minimum Treasury or IRS educationand experience requirements 27 and must regularly perform compensatedappraisals. 28

The appraisal itself is subject to another set of regulations, 29 including arequirement that it must be made no earlier than two months before the gift and no

price structures.").17. Treas. Reg. §§ 1.170A-l(c)(2), 20.2031-1(b), 25.2512-1.18. Rev. Rul. 78-367, 1978-2 C.B. 249, 250.19. Estate of Gilford v. Comm'r, 88 T.C. 38, 52-53 (1987).20. I.R.C. § 170(a)(1); see generally IRS PUBLICATION 561: DETERMINING THE VALUE OF

DONATED PROPERTY 4-5 (2007), http://www.irs.gov/pub/irs-pdf/p561.pdf.21. I.R.C. § 170(f)(8)(A).22. Id §§170(0(1l)(A)(i), 170(f)(11)(A)(ii)(II), 170(f)(11)(B).23. Id. § 170(f)(1 1)(A)(ii)(1).24. This figure is calculated by looking at all similar gifts of a donor: I.R.C. § 170(f)(l l)(F).

Thus, if a donor gives a painting worth $4,000 to one museum and another painting worth $1,500 toanother museum, she must obtain appraisals of both paintings as their aggregate value exceeds $5,000.

25. Id. § 170(f)(11)(C).26. Id. § 170(f)(1 1)(E)(i).27. I.R.S. Notice 06-96, 2006-2 C.B. 902, § 3.01.28. I.R.C. § 170(f)(1 1)(E)(ii).29. Id. § 170(f)(1 1)(E)(i); Treas. Reg. § 1.170A-13(c)(3)(i). See Notice 06-96, 2006-2 C.B. 902, §

3.04(1) (regulations continue to apply, except where inconsistent with statutes).

[33:2244


later than the due date of the return on which the deduction is claimed.30 Theappraisal must state, among other information, the description and physicalcondition of the property along with its fair market value, accompanied by anexplanation of the valuation method used to determine that value and a statement ofthe facts used in applying the valuation method.3 '

The second important mechanism of controlling donor's valuations of art is theIRS Art Advisory Panel, established in 1968, which periodically reviews propertyappraisals submitted by taxpayers who are claiming charitable deductions or payinggift or estate tax when these cases are selected for audit and concern works of artwith a claimed value of $20,000 or more. 32 The panel is composed of twenty-fiveuncompensated art experts who review cases anonymously, without knowingwhether a higher valuation would be favorable or not to the taxpayer. The panelworks from appraisals and photographs submitted by the taxpayer.

In 2007, the panel met for five days and reviewed 1,002 items.33 The panel'srecommended adjustments lowered the value of items in charitable contributioncases by 47% and raised the value of estate and gift appraisals by 58%,34 acceptingonly 36% of the submitted appraisals without change. 35 For the charitablecontribution cases, these adjustments resulted in a lowering of claimed value bynearly $7 million. 36

2. The Related Use Rule

The second major area of concern for donors of antiquities is the related userule. Congress created the current version of this rule in 2006. It retroactivelyreduces a donor's deduction for a charitable gift of tangible personal property if thedonee (1) sells or otherwise disposes of the property within three years of thedonor's gift and (2) does not file a certification that its use of the property wasrelated to its exempt purposes or functions. 37 The rule's relation to valuation isclear, if somewhat indirect: the value of a work which does not continue to providevalue to the donee institution is lowered, since it is the charitable value which is ofconcern to the IRS.

The related use rule takes into account the intent of both the donor and thedonee. The donor's intent is of interest since the rule applies to gifts of tangiblepersonal property which the donee has "identified ... as related to the purpose or

30. Treas. Reg. § 1.170A-13(c)(3)(i).31. Id. § 1.170A-13(c)(3)(ii).32. Internal Revenue Manual §§ 4.48.2 & 8.18.1.3, available at http://www.irs.gov/irm/

index.html.33. THE ART ADVISORY PANEL OF THE COMMISSIONER OF INTERNAL REVENUE, ANNUAL

SUMMARY REPORT 2 (2007), http://www.irs.gov/pub/irs-utl/annrep07.pdf.34. Id. at 4. Taxpayers often undervalue items in estates or gifts in order to avoid estate and gift

taxes, which apply when the total value of an estate or the cumulative value of gifts exceed a certainamount.

35. Id.36. Id. at 5.37. I.R.C. § 170(e)(1)(B).

2010] 245


function constituting the basis of' the donee's federal tax exemption.38 Thetaxpayer who claims that his or her donated property has a use related to thedonee's exempt purpose or function while "know[ing] that such property is notintended for such a use" may be fined $10,000 in addition to being subject to othercriminal penalties. 39 However, the IRS will presume that a donation is related tothe museum's exempt purposes if the donation is the type of object that themuseum normally retains; for example, a painting to a fine arts museum or a fossilto a natural history museum.40

The donee's intent is relevant for the certification requirement. This writtendocument, "signed under penalty of perjury by an officer of the doneeorganization," allows the donor to retain the full fair market value of his or herdonation if the donee certifies that either (1) that the donee's use (and transfer) ofthe property is related to its exempt purpose or function or (2) that the "intendeduse of the property by the donee at the time of the contribution" later became"impossible or infeasible to implement." 41

If the donee transfers the property without making this certification, the value ofthe donor's deduction is reduced to either his or her adjusted basis for the property(if the donee transfers the property before the end of the taxable year during whichthe donor made the gift) 42 or to an amount between the fair market value and theadjusted basis (if the donee transfers of the property after the end of the taxableyear of the donation but within three years after the gift).43

The three year period of the related use rule is consistent with the general threeyear statute of limitations for the IRS to assess a tax, audit a tax return or begin atax-related court proceeding.44

II. THE ANTIQUITIES SITUATION

Having described the general framework of regulations for the charitablededuction of art in general, I will now describe some aspects of the contemporarymarket for antiquities and show there is a scholarly consensus that the majority ofunprovenanced antiquities sold to private collectors in the U.S. in the last 50 yearswere looted from their countries of origin.

I will use the term "looting" to describe any set of acts by which an antiquity isobtained and illegally removed from its country of origin. The looseness of thisterm is necessary because antiquities can be obtained in a number of ways:deliberately dug up from archeological sites, accidentally uncovered duringconstruction projects, stolen from museums, etc. The illegality requirement meansthat the country of origin must prohibit the export of the type of antiquity in

38. 1.R.C. §§ 170(e)(7)(C), 6050L(a)(2)(A). The related use rule also applies only when theclaimed deduction exceeds both $5,000 and the donor's adjusted basis for the property. Id.

39. 1.R.C. § 6720B1 Pub. L. No. 109-280, § 1215(d)(3), 120 Stat. 780 (2006).40. Treas. Reg. § 1.170A-4(b)(3)(ii)(b).41. I.R.C. § 170(e)(7)(D); Treas. Reg. § 1.170A-4(b)(3)(ii).42. I.R.C. § 170(e)(1)(B)(i)(II).43. I.R.C. § 170(e)(7)(B).44. I.R.C. § 6501(a); Treas. Reg. § 301.6501(a)-l(a)-(b).

246 [33:2


question. There are a variety of methods by which countries regulate the export ofantiquities, from merely requiring proper export documentation to imposingnational ownership laws that make all antiquities the property of the state. It is thelatter situation with which this paper is concerned.

I use "provenance" in the art historical sense of the record of where an objecthas been, and who has owned it, since its creation. Many antiquities excavated byarcheologists have relatively complete provenances. For example, the bust ofNefertiti was carved sometime during this Egyptian queen's lifetime (c. 1370-1330B.C.E) and was abandoned in a sculptor's workshop in Tell el-Amama until it wasexcavated on December 6, 1912 by a German archeological team. 45 After a briefperiod of possession by a German sponsor of the excavation, it was donated to theBerlin Egyptian Museum, where it has remained since.

By contrast, the great majority of antiquities sold to private collectors in the lastfifty years have no provenance. A tradition of privacy allows dealers and auction-houses to omit information about the previous owners of the artifacts. Instead,antiquities are described with vague geographical locators (for example, "said to befrom Apulia"), which are based on connoisseurship rather than actual knowledge ofthe find-spot or country of origin. A survey of Sotheby's and Christie's auctions ofantiquities in London from World War II through 2000 showed that around 95percent of the objects had no indication of a find-spot, and 89 percent had nohistorical information listed whatsoever. 46 Similarly, less than one percent ofMayan objects auctioned between 1971 and 1999 by Sotheby's were listed withany indication of find-spot. 47 There are similar studies of lack of provenance forother categories of antiquities. 48

If an antiquity is unprovenanced-i.e., if it is not accompanied bydocumentation of its find-spot and ownership history-it is difficult to ascertainwhether it was legally exported from its country of origin. Legal export means that

45. Kurt Siehr, The Beautiful One Has Come-To Return: The Return of the Bust of Nefertitifrom Berlin to Cairo, IMPERIALISM, ART AND RESTITUTION 135 (2007).

46. Christopher Chippindale et al., Collecting the Classical World: First Steps in a QuantitativeHistory, 10(1) INT'L J. CULTURAL PROP. 1, 19-20 (2001).

47. Elizabeth Gilgan, Looting and the Market for Maya Objects: A Belizean Perspective, inTRADE IN ILLICIT ANTIQUITIES: THE DESTRUCTION OF THE WORLD'S ARCHAEOLOGICAL HERITAGE 73,80 (N. Brodie, J. Doole, & C. Renfrew eds., 2001).

48. E.g., Neil Brodie, The Market in Iraqi Antiquities 1980-2008, available athttps://www.stanford.edulgroup/chr/cgi-bin/drupal/files/Market%20in%201raqi%2Oantiquities%20(2008)%20txt.pdf, Christopher Chippindale & David Gill,Material Consequences of Contemporary Classical Collecting, 104(3) AM. J. ARCHAEOLOGY 463, 473(2000) (91 percent of ancient objects in the collections published in 1990s have no known find-spot andare not documented before 1945); David Gill & Christopher Chippindale, Material and IntellectualConsequences of Esteem for Cycladic Figurines, 97 AM. J. ARCHAEOLOGY 601, 629 (1993) (aroundninety percent of known Cycladic figurines have no provenance); R. J. Elia, Analysis of the Looting,Selling, and Collecting of Apulian Red-Figure Vases: A Quantitative Approach, in TRADE IN ILLICITANTIQUITIES: THE DESTRUCTION OF THE WORLD'S ARCHAEOLOGICAL HERITAGE 145, 147 (N. Brodie,J. Doole & C. Renfrew eds., 2001) (around eighty-nine percent of known Apulian red-figure vases haveno known find-spot); and Kathryn Walker Tubb & Neil Brodie, From Museum to Mantelpiece: TheAntiquities Trade in the United Kingdom, in DESTRUCTION AND CONSERVATION OF CULTURALPROPERTY 102, 110 (Robert Layton, Peter G. Stone & Julian Thomas eds., 2001).

2010] 247


an antiquity either left its country of origin before the passage of nationalownership laws or other bars to its export, or that it was accompanied by properexport permissions after the passage of these laws. The large amount of antiquitiesthat began to enter the market in the last fifty years is too great to be accounted forby a history of legal collecting.49 For example, as a U.S. court has recognized,Italy declared in 1939 that all antiquities in Italy belonged to the nationalgovernment and could not be alienated or exported.50 Archeologists are unwillingto believe that the thousands of Italian antiquities which passed through theantiquities market post-1939 left Italy before that date, remaining unknown toscholarship until they emerged in contemporary sales.

Archeologists instead propose that the source of the majority of unprovenancedantiquities in the current market is looting. Scholars have extensively documentedthe existence of ravaged archeological sites from many cultures, includingMesopotamia, 5 1 Pre-Columbian cultures, 52 ancient Greece and Rome, 53 variousAfrican sites 54 and even Native American sites in the United States.55 Careful

49. E.g., Kathryn Walker Tubb & Neil Brodie, From Museum to Mantelpiece: The AntiquitiesTrade in the United Kingdom, in DESTRUCTION AND CONSERVATION OF CULTURAL PROPERTY 102,105-07 (Robert Layton, Peter G. Stone & Julian Thomas eds., 2001) (discussing the "supermarketapproach" to selling of small, inexpensive antiquities-thousands of which were available from Britishantiquities shops and mail-order catalogues, and arguing that the "sale and collection of theseunprovenanced artifacts are the ultimate causes of the looting").

50. United States v. An Antique Platter of Gold, 991 F. Supp. 222, 231-32 (S.D.N.Y. 1997).51. See, e.g., MCGUIRE GIBSON & AUGUSTA MCMAHON, LOST HERITAGE: ANTIQUITIES STOLEN

FROM IRAQ'S REGIONAL MUSEUMS (1992); THE LOOTING OF THE IRAQ MUSEUM, BAGHDAD: THE LOSTLEGACY OF ANCIENT MESOPOTAMIA (Milbry Polk & Angela M. H. Schuster, eds., 2005); ZainabBahrani, Iraqs Cultural Heritage: Monuments, History, and Loss, ART J. Winter 2003, at 10; RobinGreeley, Ancient Iraq, Contemporary Crisis, ART J., Winter 2003, at 7; John Malcolm Russell, WhyShould We Care?, ART J., Winter 2003, at 22; Elizabeth C. Stone, Patterns of Looting in Southern Iraq,82 ANTIQUITY 125 (2008); K. D Politis, Biblical Zoar: The Looting of an Archaeological Site,MINERVA, Nov.-Dec. 1994, at 12.

52. See, e.g., K. Bruhns, The Methods of the Guaqueria: Illicit Tomb Robbing in Colombia,ARCHAEOLOGY, April 1972, at 140; Michael D. Coe, From Huaquero to Connoisseur: The EarlyMarket in Pre-Columbian Art, in COLLECTING THE PRE-COLUMBIAN PAST 271 (E. H. Boone ed., 1983);David Matsuda, The Ethics ofArchaeology, Subsistence Digging, and Artifact Looting in Latin America:Point, Muted Counterpoint, 7 INT'L J. CULTURAL PROP. 87 (1998); David M. Pendergast, And the LootGoes On: Winning Some Battles, But Not the War, 18 J. FIELD ARCHAEOLOGY 89 (1991).

53. See, e.g., ROGER ATWOOD, STEALING HISTORY: TOMB RAIDERS, SMUGGLERS, AND THELOOTING OF THE ANCIENT WORLD (2004); PETER WATSON & CECILIA TODESCHINI, THE MEDICICONSPIRACY: THE ILLICIT JOURNEY OF LOOTED ANTIQUITIES, FROM ITALY'S TOMB RAIDERS TO THEWORLD'S GREATEST MUSEUMS (2006); R.M. Cook, Excavations and the Antiquities Trade, inPERIPLOUS: PAPERS ON CLASSICAL ART AND ARCHAEOLOGY PRESENTED TO SIR JOHN BOARDMAN 68(G. R. Tsetskhladze, A. J. N. W. Prag & A. M. Snodgrass eds., 2000); Diura Thoden van Velzen, TheWorld of Tuscan Tomb Robbers: Living with the Local Community and the Ancestors, 13 INT'L J.CULTURAL PROP. 111 (1996); Rebecca Mead, Den ofAntiquity, NEW YORKER, April 9, 2007, at 52.

54. See, e.g., Patrick R. McNaughton, Malian Antiquities and Contemporary Desire, AFRICANARTS, Autumn 1995, at 22; Daniel Shapiro, The Ban on Mali's Antiquities: A Matter of Law, 28AFRICAN ARTS, Autumn 1995, at 42 (1995); Folarin Shyllon, The Nigerian and African Experience onLooting and Trafficking in Cultural Objects, in ART AND CULTURAL HERITAGE: LAW, POLICY ANDPRACTICE 137 (Barbara T. Hoffman ed., 2007); Samuel Sidib6, The Pillage of Archaeological Sites inMali, AFRICAN ARTS, Autumn 1995, at 52.

55. See, e.g., Ann M. Early, Profiteers and Public Archaeology: Antiquities Trafficking in

248 [33:2


studies, such as Kirkpatrick's Lords of Sipan, describe tenacious looters who useeverything from shovels to bulldozers and dynamite to extract saleable artifactsfrom sites-in the process, destroying fragile but archeologically valuable materialssuch as animal or plant remains, wood, cloth, architectural structures or lessprofitable objects such as pottery vessels. 56 Other works document the networks ofmiddlemen who connect looters to dealers and ultimately to buyers-networks sosophisticated that Italy has begun to combat them by using the same techniques ituses against the Mafia. 57

The amount of scholarship documenting looting is extensive,58 and the problemshows no signs of abating. News reports continue to confirm incidents of lootingand of illicit export; in the last twelve months, thousands of looted and illegallyexported antiquities have been reported in Africa;59 Asia; 60 the Near and Middle

Arkansas, in THE ETHICS OF COLLECTING CULTURAL PROPERTY: WHOSE CULTURE? WHOSEPROPERTY? 39 (Phyllis Mauch Messenger ed., 1999); S.P.M. Harrington, The Looting of Arkansas,ARCHAEOLOGY, May-June 1991, at 22; F. P. McManamon, The Protection of ArchaeologicalResources in the United States: Reconciling Preservation with Contemporary Society, in CULTURALRESOURCE MANAGEMENT IN CONTEMPORARY SOCIETY: PERSPECTIVES ON MANAGING ANDPRESENTING THE PAST 40 (F. P. McManamon & A. Hatton eds., 2000); Bruce E. Rippeteau, AntiquitiesEnforcement in Colorado, 6 J. FIELD ARCHAEOLOGY 85 (1979).

56. SIDNEY D. KIRKPATRICK, LORDS OF SIPAN: A TALE OF PRE-INCA TOMBS, ARCHAEOLOGY,AND CRIME (1992).

57. PETER WATSON, SOTHEBY'S: INSIDE STORY (1997); WATSON & TODESCHINI, supra note 53.58. See, e.g., TRADE IN ILLICIT ANTIQUITIES: THE DESTRUCTION OF THE WORLD'S

ARCHAEOLOGICAL HERITAGE, supra note 47; NEIL BRODIE, JENNY DOOLE & PETER WATSON,STEALING HISTORY: THE ILLICIT TRADE IN CULTURAL MATERIAL (2000); RUSSELL CHAMBERLIN,LOOT!: THE HERITAGE OF PLUNDER (1983); SIMON R. M. MACKENZIE, GOING, GOING, GONE:REGULATING THE MARKET IN ILLICIT ANTIQUITIES (2005); KARL E. MEYER, THE PLUNDERED PAST(1977); Neil Brodie, An Archeologist's View of the Trade in Unprovenanced Antiquities, in ART ANDCULTURAL HERITAGE: LAW, POLICY AND PRACTICE 52 (Barbara T. Hoffman ed., 2007); PATRICK J.O'KEEFE, TRADE IN ANTIQUITIES: REDUCING DESTRUCTION AND THEFT (1997); COLIN RENFREW,LOOT, LEGITIMACY AND OWNERSHIP: THE ETHICAL CRISIS IN ARCHAEOLOGY (2000); Neil Brodie &David Gill, Looting: An International View, in ETHICAL ISSUES IN ARCHAEOLOGY (Larry J.Zimmerman, Karen D. Vitelli & Julie Hollowell-Zimmer eds., 2003); Giles Constable, The Looting ofAncient Sites and the Illicit Trade in Works of Art, 10 J. FIELD ARCHAEOLOGY 482 (1983); JulieHollowell-Zimmer, Digging in the Dirt-Ethics and "Low-End Looting," in ETHICAL ISSUES INARCHAEOLOGY (Larry J. Zimmerman, Karen D. Vitelli & Julie Hollowell-Zimmer eds., 2003).

59. See, e.g., Linda Giles, Monica Udvardy & John Mitsanze, Cultural Property as GlobalCommodities: The Case of Milikenda Memorial Statues, 27 CULTURAL SURVIVAL Q. 78 (2004);Monica Udvardy, Linda Giles & John Mitsanze, The Transatlantic Trade in African Ancestors:Miikenda Memorial Statues (Vigango) and the Ethics of Collecting and Curating Non- Western CulturalProperty, 105 AM. ANTHROPOLOGIST, 566 (2003); Marc Lacey, The Case of the Stolen Statues: Solvinga Kenyan Mystery, N.Y. TIMES, Apr. 16, 2006, at 4; Mike Pflanz, Kenyans Welcome Home SacredRelics Stolen by British, DAILY TELEGRAPH, Apr. 15, 2006; Aussie Arrested for "Mummy Smuggling"in Cairo, NEWS.COM.AU, Dec. 25, 2008, http://www.news.com.au/story/0,27574,24841734-38195,00.html (Australian citizen arrested at Cairo airport with two animalmummies and nineteen ancient votive figurines in luggage); Robin Turner, South Africa's BattlefieldsLooted for Rich Collectors, WALES, Feb. 8, 2009, available at http://www.walesonline.co.uk/news/wales-news/2009/02/08/south-africa-s-battlefields-looted-for-rich-collectors-91466-22877816.

60. See, e.g., Julian Ryall, Thieves Target Japan's Buddhist Statues, DAILY TELEGRAPH, Oct. 22,2008, available at http://www.telegraph.co.uk/news/worldnews/asia/japan/3239231/Thieves-target-Japans-Buddhist-statues.html (antiquities dealers arrested on suspicion of stealing dozensof ancient Buddist statues); Cheang Sokha, Officials Lower Their Hopes for Return of Artefacts From

2010] 249


East; 61 Greece and Macedonia; 62 Italy; 63 other areas of Europe; 64 North America65

and South America. 66

Thais, PHNOM PENH POST, Feb. 12, 2009, available athttp://www.phnompenhpost.com/index.php/2009021224165/National-news/Officials-lower-their-hopes-for-retum-of-artefacts-from-Thais.html; Police Recover Huge Cache of Illegal Artifacts Hoarded byAmerican Explorer, NEPAL NEWS, May 24, 2008, http://www.nepalnews.com/archive/2008/may/may24/news05.php (129 ancient Nepalese artifacts seized from Ian Baker).

61. See, e.g., Kim Sengupta, Looted Ancient Treasures Recovered in Basra Sting',INDEPENDENT, Dec. 23, 2008, available at http://www.independent.co.uk/news/world/middle-east/looted-ancient-treasures-recovered-in-basra-sting-1208500.html; Iraq Seizes Scores ofLooted Artifacts, REUTERS UK, Dec. 16, 2008, http://uk.reuters.com/article/lifestyleMolt/idUKTRE4BF5V620081216 (228 antiquities seized in Basra); Iran Retrieves 42 Stolen Artifacts,PRESSTV, Oct. 5, 2008, http://www.presstv.ir/detail.aspx?id=71 381 &sectionid=35 1020105 (artifactsfrom early Islamic era to 13,h century recovered from Italy); Jordan Hands Over Stolen Iraqi Artifacts,ASSOCIATED PRESS, June 22, 2008, http://abcnews.go.com/International/wireStory?id=5221656 (2,466Iraqi antiquities seized at Jordan's border); Etgar Lefkovits, Man Posing as Jlem Tour Guide Nabbedfor Selling Ancient Coins to Tourists, JERUSALEM POST, Aug. 19, 2008, available athttp://wwwjpost.com/servlet/Satellite?cid=1 218710408521 &pagename=JPost%2FJPArticle%2FShowFull.

62. See, e.g., Helena Smith, Divers Plunder Greece's Sunken Treasure Troves, GUARDIANWEEKLY, Jan. 30, 2009, available at http://www.guardian.co.uk/world/2009/jan/30/greek-shipwrecks-scuba-diving-ban; Macedonian Police Seize Stolen Antiquities, ASSOCIATED PRESS,Sept. 24, 2008, available at http://www.usatoday.com/news/world/2008-09-24-3125415735_x.htm;(seventy Greek and Roman artifacts seized from two antiquities smugglers); Nicholas Paphitis, Hungaryto Return Looted Antiquities to Greece, ASSOCIATED PRESS, Sept. 11, 2008, available athttp://www.usatoday.com/news/world/2008-09-11-3087704081 x.htm (Greek artifacts purchased byHungarian museum from a private collector to return to Greece).

63. See, e.g., Artefacts on e-Bay Seized, STRAITS TIMES, Jan. 15, 2009, available athttp://www.straitstimes.com/Breaking%2BNews/World/Story/STIStory_326293.html (ancient Sicilianartifacts); Archeologia: Calano i Furti, Aumenta il Traffico Via Web, Press Release from the ItalianMinistry of Culture, July 30, 2008, http://www.culturaitalia.beniculturali.it/pico/modules/focus/it/focus_0247.html?T=1217494540677 (thirty-three antiquities recovered from online sellers); FrankJordans, Swiss to Return Stolen Artifacts to Italy, ASSOCIATED PRESS, Nov. 6, 2008, available athttp://www.annoticoreport.com/2008/1 I/swiss-to-retum-4400-stolen-antiquities.html.

64. See, e.g., Svetlana Guineva, Italy to Send Back Stolen Antique Coins Confiscated in Verona,SOPHIA ECHO, Jan. 9, 2009, available at http://sofiaecho.com/2009/01/09/665956jitaly-to-send-back-stolen-antique-coins-confiscated-in-verona (circa 3800 antique coins andother archaeological objects returned to Bulgaria); Italian Police Recover 3,500 LootedArtifacts,ASSOCIATED PRESS, June 6, 2008, available at http://www.iht.com/articles/ap/2008/06/06/news/Italy-Looted-Art.php (ancient artifacts seized in three raids from private houses near Rome); Jon Land,Man Admits Carrying Out Illegal Excavations at UK Heritage Sites, 24DASH.COM, June 25, 2008,http://www.24dash.com/news/Communities/2008-06-25-Man-admits-canying-out-illegal-excavations-at-UK-heritage-sites (British man arrested for taking Roman artifacts from at least 20 archeologicalsites).

65. See, e.g., Bryan Denson, Man Accused in Illegal Dig For Artifacts, OREGONIAN, May 18,2008, http://www.oregonlive.com/news/oregonian/index.ssf?/base/news/1210996512240860.xml&coll=7 (secondhand store owner indicted on three counts of excavating anarchaeological site, damaging government property and conspiring to excavate, remove and sellarchaeological resources illegally taken from federal lands); Parrish L. Howard, Agency Reports Rise inArtifacts Thefts, FLORIDA TIMES-UNION, June 23, 2008, available at http://www.jacksonville.com/tu-online/stories/062308/geo_293894489.shtml (reporting dramatic rise in illegal digging for NativeAmerican artifacts in Florida public land); Sandy Louey, Folsom Pair Pleads Not Guilty in ArtifactTheft Case, SACRAMENTO BEE, Nov. 13, 2008, available athttp://www.sacbee.com/static/weblogs/crime/archives/017016.html (two Californians charged withremoving Native American antiquities from federal land).

250 [33:2


Archeologists have concluded that the artifacts taken from the looted sites aresold as unprovenanced antiquities. 67

One logical way to decrease the incidences of looting and smuggling ofantiquities is to reduce the demand for these artifacts. As the Director for theInternational Foundation for Art Research has made clear, looting "is motivated bymoney," and if collectors and dealers became more reluctant to buy artifactswithout a solid provenance, "then the market will begin to dry up." 68 Everyunprovenanced work sold, even if it itself was not looted, is an encouragement forlooters and middlemen who can hope to sell the antiquities they uncover withouthaving to provide a provenance. 69

A. U.S. RESPONSES TO ILLEGAL TRADE IN ANTIQUITIES

Although the U.S. has few laws regulating its own cultural property,70 it hasincreasingly paid attention to means of decreasing the flow of illicit antiquities over

66. See, e.g., Patrick McGroarty, German Police Seize Aztec, Incan Art, ASSOCIATED PRESS, Apr.30, 2008, available at http://seattletimes.nwsource.com/html/entertainment/2004382549_apgermanyartfound.html (Munich police seized 1,100 Aztec, Incan and Mayan artifactsfrom a private collector); Spain Returns Artefacts to Peru, BBC NEWS, Oct. 14, 2008,http://news.bbc.co.uk/2/hi/europe/7669264.stm (1,000 pre-Columbian artifacts seized from a privatecollector; 243 returned to Peru); Spain Returns Looted Peruvian Artifacts, ASSOCIATED PRESS, Oct. 29,2008, http://www.nydailynews.com/latino/2008/10/29/2008-1029_spainretums-looted-peruvian_ artifacts_-2.html (forty-five pre-Columbian artifacts).

67. See, e.g., Arlen F. Chase, Diane Z. Chase & Harriot W. Topsey, Archaeology and the EthicsofCollecting, in ARCHAEOLOGICAL ETHICS 30 (Karen D. Vitelli ed., 1996).

68. Morning Edition: Metropolitan Museum Returns Artifacts to Turkey (NPR radio broadcast,Sept. 24, 1993). See also Mark J. Lynott, Ethical Principles and Archaeological Practice:Development of an Ethics Policy, 64 AM. ANTIQUITY 589, 590 (1997) (citing S.P.M. Harrington, TheLooting of Arkansas, ARCHAEOLOGY, MAY-JUNE 1991, at 22 ("[T]he increasing commercial value ofarcheological objects within the art market has led to a significant expansion in the market and thelooting of archeological sites.")); David Pendergast, And the Loot Goes On: Winning Some Battles, butNot the War, 18 J. FIELD ARCHAEOLOGY 89 (1991); Hugue de Varine, The Rape and Plunder ofCultures, 35 MUSEUM 152, 157 (1983) (the "fundamental responsibility" of antiquities-buyingindividuals and countries is to refrain from purchasing illicit cultural property). This idea of theinteraction of the market and looting is also closely tied to archeologists' disapproval of privateownership of antiquities, as is made clear in the official position on commercialization of the Society forAmerican Archeology: "[Tihe buying and selling of objects out of archaeological context iscontributing to the destruction of the archaeological record in the American continents and around theworld. The commercialization of archaeological objects-their use as commodities to be exploited forpersonal enjoyment or profit-results in the destruction of archaeological sites and of contextualinformation that is essential to understanding the archaeological record." "Third Ethical Principle" ofthe Society for American Archeology, quoted and discussed in M.J. Lynott, Ethical Principles andArchaeological Practice: Development ofan Ethics Policy, 62 AMERICAN ANTIQUITY 589, 592 (1997).See also L. E. Murphy et al., Commercialization: Beyond the Law or Above it? Ethics and the Selling ofthe Archaeological Record, in ETHICS IN AM. ARCHAEOLOGY: CHALLENGES FOR THE 1990S 45 (MarkLynott and Alison Wylie eds., 1995).

69. Dealers, who consider their own practices to be highly ethical, often feel insulted byarcheologists' boycotts. James Ede, The Antiquities Trade: Towards a More Balanced View, inANTIQUITIES: TRADE OR BETRAYED: LEGAL, ETHICAL, AND CONSERVATION ISSUES 211, 211 (KathrynWalker Tubb ed., 1995). It is easier to understand archeologists' refusal to recognize even ethicaldealers if one understands the reasons for their condemnation of the trade as a whole.

70. The Archaeological Resources Protection Act of 1979 (16 U.S.C. § 470aa-470mm); the

2010] 251

252 COLUMBIA JOURNAL OF LAW & THE ARTS [33:2

its borders, at least in part because of concerns over the connections of antiquitiessmugglers to drug smuggling71 and terrorism. 72

There are many mechanisms used in the U.S. to combat the illegal trade incultural property.73 They include the domestic implementation of pertinentinternational treaties; 74 the formation of bilateral agreements which impose importrestrictions for other countries' endangered artifacts;75 and application of domesticlaw, especially the use of the National Stolen Property Act.76 Two of thesemechanisms are discussed in this paper: (1) bilateral agreements, since theyreverse the burden of proof of showing lawful export and (2) the use of theNational Stolen Property Act, since this requires possessors of antiquities to havegood title.

In the McClain case, U.S. prosecutors used the National Stolen Property Act toreturn Pre-Columbian antiquities to Mexico. 77 The prosecution had evidence thatthe antiquities in question had been removed from Mexico well after the passage ofthe relevant Mexican law declaring national ownership. Since the antiquities were

Native American Graves Protection and Repatriation Act of 1990 (25 U.S.C. § 3001 et seq.); and theAbandoned Shipwreck Act of 1987 (43 U.S.C. § 2101 et seq.). On these laws, see Marilyn Phelan, ASynopsis of the Laws Protecting Our Cultural Heritage, 28 NEW ENG. L. REV. 63 (1993-1994).

71. See, e.g., UK MINISTERIAL ADVISORY PANEL ON THE ILLICIT TRADE IN CULTURAL OBJECTS13 (2000), available at http://www.culture.gov.uk/PDF/Report%20of/o20Advisory%20Panel%20on%20lllicit%20Trade.pdf (evidence of links between theillicit antiquities trade and other illegal activities is persuasive). For example, in 2000, an easternEuropean national was arrested at Gatwick airport, en route to the U.S.; he was carrying substantialquantities of a banned class C drug, and around 9,750 ancient coins. Id. at 47-48.

72. See, e.g., Military Investigator: Iraqi Extremists Find Funding in Antiquity SmugglingNetworks, ASSOCIATED PRESS, March 18, 2008, available at http://www.iht.com/articles/ap/2008/03/18/arts/lraq-lnsurgents-Antiquities.php (Marine Reserve Colonel and New York assistant district attorneyMatthew Bogdanos argues that the link between extremist groups and antiquities smuggling in Iraq isundeniable).

73. See generally James A.R. Nafziger, Seizure and Forfeiture of Cultural Property by the UnitedStates, 5 VILL. SPORTS & ENT. L.J. 19 (1998); Andrea Cunning, U.S. Policy on the Enforcement ofForeign Export Restrictions on Cultural Property & Destructive Aspects of Retention Schemes, 26Hous. J. INT'L L. 449 (2003-2004); James R.McAlee, The McClain Case, Customs, and Congress, 15N.Y.U. J. INT'L L. & POL. 813 (1982-1983); James R. McAlee, From the Boston Raphael to PeruvianPots: Limitations on the Importation of Art into the United States, 85 DICK. L. REv. 565 (1980-1981).On international legal efforts to protect antiquities, see, e.g., LEGAL ASPECTS OF INTERNATIONAL TRADEIN ART-LES ASPECTS JURIDIQUES DU COMMERCE INTERNATIONAL DE L'ART (Martine Briat & JudithA. Freedberg eds., 1996); PATTY GERSTENBLITH, ART, CULTURAL HERITAGE, AND THE LAW (2004);ART CULTURAL HERITAGE: LAW, POLICY & PRACTICE (Barbara Hoffman ed., 2006); JOHN HENRYMERRYMAN, THINKING ABOUT THE ELGIN MARBLE: CRITICAL ESSAYS ON CULTURAL PROPERTY, ARTAND LAW (2000); LYNDEL V. PROTT, COMMENTARY ON THE UNIDROIT CONVENTION ON STOLEN ANDILLEGALLY EXPORTED CULTURAL OBJECTS 1995 (1997).

74. Convention on the Means of Prohibiting and Preventing the Illicit Import, Export andTransfer of Ownership of Cultural Property, November 14, 1970, 823 U.N.T.S. 231; Convention for theProtection of Cultural Property in the Event of Armed Conflict (1954 Hague Convention on CulturalProperty), May 14, 1954, 249 U.N.T.S. 240.

75. Through the Convention on Cultural Property Implementation Act, 19 U.S.C. § 2600 (2006).76. 18 U.S.C. § 2314-2315 (2006).77. United States v. McClain, 545 F.2d 988 (5th Cir. 1977), reh'g denied, 551 F.2d 52 (5th Cir.

1977). See also United States v. McClain, 593 F.2d 658 (5th Cir. 1979), cert. denied, 444 U.S. 918(1979).


owned by the Mexican government, the court treated them as stolen property andfound the defendants guilty of transporting them across U.S. state borders.Although this logic has been criticized as simply a covert enforcement of othercountry's export laws,78 it has been used in a number of subsequent cases, 79 andU.S. courts have recognized the national ownership laws of Italy,80 Egypt, 8'Turkey, 82 Cyprus 83 and Peru.84

In a different approach, the U.S. has officially recognized the gravity of theprevalence of illicit export in a number of countries. The U.S. became a party tothe 1970 UNESCO Convention on the Means of Prohibiting and Preventing theIllicit Import, Export and Transfer of Ownership of Cultural Property in 1983.Article nine of this Convention allows state parties "whose cultural patrimony is injeopardy from pillage of archaeological or ethnological materials" to call uponother state parties, who must endeavor to "determine and to carry out the necessaryconcrete measures, including the control of exports and imports" of the endangeredmaterials. In order to fulfill this obligation, Congress passed the Convention onCultural Property Implementation Act (CPIA).8 Under the CPIA, other stateparties to the 1970 UNESCO Convention may request that the U.S. restrict theimport of designated archaeological or ethnological material 87 from the requestingstate into the U.S. 88 Congress is advised on these requests by the Cultural Property

78. See, e.g., James F. Fitzpatrick, A Wayward Course: The Lawless Customs Policy towardCultural Properties, 15 N.Y.U. J. INT'L L. & POL. 857 (1982-1983).

79. For a detailed discussion of the use of the McClain precedent to reclaim a group ofantiquities, see Lawrence Kaye & Carla Main, The Saga of the Lydian Hoard, in ANTIQUITIES: TRADEOR BETRAYED: LEGAL, ETHICAL, AND CONSERVATION ISSUES (Kathryn Walker Tubb ed., 1995).

80. United States v. An Antique Platter of Gold, 991 F. Supp. 222, 231-32 (S.D.N.Y. 1997).81. United States v. Schultz, 178 F. Supp. 2d 445, 447-48 (S.D.N.Y. 2002).82. Republic of Turkey v. Metropolitan Museum of Art, 762 F. Supp. 44, 45 (S.D.N.Y. 1990);

Turkey v. OKS Partners, No. 89-3061 1994 U.S. Dist. LEXIS 17032 (D. Mass. June 8, 1994).83. Autocephalous Greek-Orthodox Church v. Goldberg & Feldman Fine Arts, Inc., 917 F.2d

278, 280-81 (7th Cir. 1990) (Republic of Cyprus and Cyprus-based Church brought suit to recoverstolen mosaics).

84. Peru v. Johnson, 720 F. Supp. 810 (C.D. Cal. 1989).85. Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and

Transfer of Ownership of Cultural Property, November 14, 1970, 823 U.N.T.S. 231. On theConvention, see generally Guido Carducci, The Growing Complexity ofInternational Art Law: Conflictof Laws, Uniform Law, Mandatory Rules, UNSC Resolutions and EU Regulations, in ART ANDCULTURAL HERITAGE: LAW, POLICY AND PRACTICE 68 (B. Hoffman ed., 2006); ANA FILIPAVRDOLJAK, INTERNATIONAL LAW, MUSEUMS AND THE RETURN OF CULTURAL OBJECTS (2006).

86. Convention on Cultural Property Implementation Act, 19 U.S.C. § 2601 et seq. (2006).87. The definition of these terms in the Act are as follows: "Archaeological material" is any

object, fragment, or part of any object of archaeological interest which was first discovered within, andis subject to export control by, a State Party to the 1970 UNESCO Convention. The object must be ofcultural significance and be at least 250 years old. 19 U.S.C. § 2601(2). "Ethnological material" is anyobject, fragment, or part of any object of ethnological interest which was first discovered within, and issubject to export control by, a State Party to the 1970 UNESCO Convention. The object must be theproduct of a tribal or nonindustrial society, and be important to the cultural heritage of a people becauseof its distinctive characteristics, comparative rarity, or its contribution to the knowledge of the origins,development, or history of that people. Id.

88. The Act also prohibits the import of articles of cultural property (not limited to archaeologicalor ethnological material) documented within an inventory of a museum or religious or secular public

2010] 253


Advisory Committee (CPAC), which is composed of representatives of variousinterests such as scholars, museum officials, dealers and the general public.

If granted, import restrictions have a five-year effective period and may berenewed in five-year increments after review by CPAC. The U.S. may also chooseto impose emergency import restrictions for a limited period of time, not to exceedeight years; the effect is the same as the five-year restrictions. The U.S. CustomsService must publish in the Federal Register a descriptive list designating thecategories of archaeological or ethnological material subject to import restrictions.So far, thirteen states have successfully concluded agreements with the U.S. underthe CPIA: Bolivia, Colombia; 89 Honduras; 90 Cambodia; 91 Cyprus; 92 Peru; 93

Italy; 94 El Salvador;9 5 Nicaragua; 96 Guatemala;97 Mali; 98 Canada;99 and China.loo

monument or similar institution in any State Party to the 1970 UNESCO Convention and which arestolen from such institutions. 19 U.S.C. § 308 (2006).

89. Import Restrictions Imposed on Certain Archaeological and Ethnological Materials FromColombia, 71 Fed. Reg. 13757-66 (Mar. 17, 2006) (restrictions on Archaeological Materials from thePre-Columbian Cultures and Certain Ecclesiastical Material from the Colonial Period).

90. Import Restrictions Imposed on Archaeological Material Originating in Honduras, 69 Fed.Reg. 12267-71 (Mar. 16, 2004) (restrictions on archaeological material from Pre-Columbian cultures).

91. Import Restrictions Imposed on Certain Khmer Stone Archaeological Material of theKingdom of Cambodia, 64 Fed. Reg. 67479-81 (Dec. 2, 1999) (restrictions on Khmer archaeologicalmaterial). See also Import Restrictions Imposed on Archaeological Materials From Cambodia, 68 Fed.Reg. 55000-05 (Sept. 22, 2003); Extension of Import Restrictions Imposed on Archaeological MaterialFrom Cambodia, 73 Fed. Reg. 54309-13 (Sept. 19, 2008).

92. Import Restrictions Imposed On Byzantine Ecclestiastical and Ritual Ethnological Materialfrom Cyprus, 64 Fed. Reg. 17529-31 (Apr. 12, 1999) (restrictions on Pre-Classical and Classicalarchaeological material). See also Import Restrictions Imposed on Pre-Classical and ClassicalArchaeological Material Originating in Cyprus, 67 Fed. Reg. 47447-50 (July 19, 2002).

93. Import Restrictions Imposed on Significant Archaeological Artifacts From Peru, 55 Fed. Reg.19029-30 (May 7, 1990) (restrictions on archaeological material from the Prehispanic cultures andcertain ethnological material from the colonial period). See also Archaeological and EthnologicalMaterial From Peru, 62 Fed. Reg. 31713-21 (June 11, 1997); Extension of Import Restrictions Imposedon Archaeological and Ethnological Materials From Peru, 67 Fed. Reg. 38877-78 (June 6, 2002).

94. Import Restrictions Imposed on Archaeological Material Originating in Italy andRepresenting the Pre-Classical, Classical, and Imperial Roman Periods, 66 Fed. Reg. 7399-7402 (Jan.23, 2001) (restrictions on categories of Pre-Classical, Classical and Imperial Roman archaeologicalmaterial). See also Extension of Import Restrictions Imposed on Archaeological Material Originating inItaly and Representing the Pre-Classical, Classical, and Imperial Roman Periods, 71 Fed. Reg. 3000-01(Jan. 19, 2006).

95. Import Restrictions on Archaeological Material From El Salvador, 52 Fed. Reg. 34614-16(Sept. I1, 1987) (restrictions on certain categories of archaeological material from prehispanic cultures).See also Extension of Import Restrictions Imposed on Certain Categories of Archaeological MaterialFrom the Prehispanic Cultures of the Republic of El Salvador, 65 Fed. Reg. 12470--71 (Mar. 9, 2000);Extension of Import Restrictions Imposed on Certain Categories of Archaeological Material From thePrehispanic Cultures of the Republic of El Salvador, 70 Fed. Reg. 11529-40 (Mar. 9, 2005).

96. Import Restrictions Imposed On Archaeological Material From the Prehispanic Cultures ofthe Republic of Nicaragua, 65 Fed. Reg. 64140-42 (Oct. 26, 2000) (restrictions on archaeologicalmaterial from pre-Hispanic cultures). See also Extension of Import Restrictions Imposed on CertainCategories of Archaeological Material From the Prehispanic Cultures of the Republic of Nicaragua, 70Fed. Reg. 61031-32 (Oct. 20, 2005)

97. Import Restrictions Imposed on Archaeological Artifacts from Guatemala, 56 Fed. Reg.15181-82 (Apr. 15, 1991) (restrictions on archaeological objects and materials from Pre-Columbiancultures). See also Import Restrictions Imposed on Archaeological Artifacts From Guatemala, 62 Fed.

254 [33:2


If a request is granted, any designated artifact which enters the U.S. withouteither an export permit issued by the state of origin or documentation showing thatthe artifact was out of the state of origin at the time the restrictions becameeffective will be confiscated by the U.S. Customs Service and returned to the stateof origin.

Thus, the establishment of a CPIA agreement reverses the usual U.S. practice ofnot enforcing other countries' export laws. A CPIA agreement also imposes aburden of proof on importers, who must show that their imports are not coveredunder the agreement. This requirement operates as an official U.S. recognition thatunprovenanced antiquities are looted until proven innocent.

III. THE FAILURE OF THE CURRENT RULES TO REDUCE LOOTING

It is clear that rules governing tax deductions for donations of art can have aneffect on taxpayer's decisions about whether to purchase art in general. 10 'Furthermore, several cases demonstrate that tax considerations have an impact ontaxpayers' decisions about whether to purchase antiquities and what to do withantiquities subject to repatriation claims.

A. RECENT CASES OF MANIPULATIONS OF THE DEDUCTION RULES

One of the most recent cases demonstrating the relation between deductions andantiquities purchases came to public attention in early 2008, when federal agentsraided the Los Angeles County Museum of Art, the Pacific Asia Museum, theBowers Museum, the Mingei International Museum and various homes and storagesites in the Los Angeles area. 102 They seized more than 10,000 artifacts from theBan Chiang culture (c. 2100 B.C.E.-200 C.E.) from what is now northeastern

Reg. 51771-74 (Oct. 3, 1997); Extension of Import Restrictions Imposed on Archaeological MaterialFrom Guatemala, 67 Fed. Reg. 61259-60 (Sept. 30, 2002).

98. Import Restrictions Imposed on Significant Archaeological Artifacts From Mali, 58 Fed. Reg.49428-30 (Sept. 23, 1993) (restrictions on archaeological material from the Niger River Valley and theBandiagara Escarpment). See also Import Restrictions Imposed on Archaeological Artifacts from Mali,62 Fed. Reg. 49594-97 (Sept. 23, 1997); Extension of Import Restrictions Imposed on ArchaeologicalMaterial From Mali, 67 Fed. Reg. 59159-60 (Sept. 20, 2002); Extension of Import Restrictions Imposedon Archaeological Material from Mali, 72 Fed. Reg. 53414-17 (Sept. 19, 2007).

99. Archaeological and Ethnological Material from Canada, 62 Fed. Reg. 19488-92 (Apr. 22,1997) (restrictions on certain categories of archaeological and ethnological Material).

100. Import Restrictions Imposed on Certain Archaeological Material from China, 74 Fed. Reg.2838-44 (Jan. 16, 2009) (import restrictions on certain archeological material).

101. Lynn R. Feldman, Note, The Restored Market Value Deduction for Donated AppreciatedProperty: One Year Is Not Enough, 15 COLUM. J.L. & ARTS 247, 258 (1990-1991) (discussing thedecline in donations of art to museums when the tax rules changed to decrease the value of the charitablededuction).

102. See generally Jason Felch & Doug Smith, You say that art is worth how much?, L.A.TIMES,Mar. 2, 2008, at Al; Matthew L. Wald, Tax Scheme Is Blamed for Damage to Artifacts, N.Y. TIMES,Feb. 4, 2008, at El; Edward Wyatt, Museum Workers Are Called Complicit, N.Y. TIMES, Jan. 26, 2008,at B7.

2552010]


Thailand. The donated artifacts in question were most probably looted fromarchaeological sites, and Thailand prohibits their export.10 3

The objects (labeled as reproductions) were smuggled out of Thailand,Myanmar and China by one conspirator and sold to U.S. taxpayers by another pairof conspirators, the owners of a Los Angeles gallery. The gallery owners providedbuyers with inflated appraisals, and the objects were donated to the museums,resulting in tax deductions for the buyers who fraudulently declared a low basis andperiod of possession of more than one year. 104

In this case, Thailand's archeological sites were looted for the sake of fraudulenttax deductions. In other cases, donors do not commit knowing fraud, but also act ina way which links looting to tax deductions. These are the cases in whichtaxpayers, notified that a country has a persuasive repatriation claim on artifactsthey possess, arrange to donate them to a non-profit organization with theunderstanding that this organization will eventually repatriate the artifacts to theircountry of origin.

Thus, the 1993 settlement of Greece v. Ward resulted in a tax deduction for thereturn of a collection of ancient Mycenaean artifacts (c. 3500 B.C.E.) to Greece. 105

The New York-based Michael Ward Gallery possessed the artifacts, which wererecognized by American scholars as stylistically identical with other Mycenaeanartifacts from a group of tombs at Aidonia, a site in southern Greece which hadbeen looted in the late 1970s. Greece was notified and filed suit in the U.S. DistrictCourt for the Southern District of New York to recover the illegally exportedartifacts. In late 1993, during pre-trial discovery, Greece and the Ward Galleryagreed on an out-of-court settlement by which the Gallery donated the artifacts tothe Society for the Preservation of the Greek Heritage, a Greek-American culturalexchange organization, which then returned them to Greece. 106 The Galleryreceived a tax deduction for this donation. The exact amount of the deduction isnot confirmed, but several reports describe it as equal to the Gallery's basis in theartifacts, e.g., the price it paid for them (allegedly $150,000).107

103. Wald, supra note 102 (Dr. Joyce C. White, of the University of Pennsylvania Museum ofArchaeology and Anthropology, identifies the objects as looted). See also Wyatt, supra note 102(undercover agent's affidavit describes ancient beads in the gallery which "were filled with dirt and hadobviously just been dug up").

104. The federal investigators claimed that staff members at the Pacific Asia Museum and theBowers Museum worked with the gallery owners, accepting the donations even though they hadinadequate provenances, and that Los Angeles County Museum of Art officials had signed backdateddonation forms (in order for the objects be categorized as long-term capital property).

105. For details of the Ward Gallery artifacts and settlement, see Emily C. Ehl, The Settlement ofGreece v. Ward: Who Loses?, 78 B. U. L. REv. 661 (1998); Ricardo J. Elia, Greece v. Ward: TheReturn ofMycenean Artifacts, 4 INT'L. J. CULTURAL PROP. 119, 120 (1995).

106. The owner of the gallery insisted that the artifacts were purchased in good faith and that therewas no conclusive proof that they had been looted from the Aidonia site. Michael Ward, Editorial,Gallery Acted in Good Faith on Greek Artifacts, N.Y. TIMEs, Feb. 10, 1996, at 22.

107. Irvin Molotsky, 20 Years After Thievery, Rare Gold Ornaments Will Return to Greece, N.Y.TIMES, Jan. 31, 1996, at C16; Mary Williams Walsh, A Grecian Treasure: Back From the Grave?,L.A. TIMES, Aug. 12, 1996, at Al.

256 [33:2


Reactions to this settlement were mixed. Some observers celebrated it as anovel solution to ownership disputes, while others criticized it for reducing therisks for dealers of purchasing potential stolen property108 and, most pointedly, forgranting a deduction which effectively passed to U.S. taxpayers the costs ofrepatriating artifacts. 0 9 At least one analysis of the Ward Gallery settlement hasasserted that the ability to obtain a tax deduction for the donation of works subjectto a repatriation claim serves as an incentive for collectors and dealers to purchaseworks without full provenances.1 10

The Ward Gallery made its donation under a version of the tax code that did notinclude the current version of the related use rule. Under the old related use rule,there was no three-year period during which the donee could not transfer thedonated object."' All that the Ward Gallery needed to show was that the donee,the Society for the Preservation of the Greek Heritage, would put the donatedartifacts to a use related to its exempt functions. Since the Society was establishedto cultivate Greek-American relations, the repatriation was a related use-despiteits transfer of the property. And, of course, the related use rule did not impact theWard Gallery, since as a dealer it could deduct only its basis, not the fair marketvalue.

By contrast, a private collector recently devised a way to defeat the currentversion of the related use rule. In January 2008, the University of Virginiaannounced that it was repatriating two ancient Greek statues (c. 525 B.C.) toItaly.112 The statues had been donated to the University in 2002, with the approvalof Italian authorities, since the terms of the gift required that the statues berepatriated to Italy after five years. Italy began to make repatriation requests for thestatues in 1988, operating on a deposition of a tomb robber who said that they hadbeen looted from a sanctuary near Morgantina, Sicily, in the late 1970s. However,Italy never instituted a suit, recognizing the cost and possibility that an Americancourt would not accept its evidence.

At the time of the repatriation requests, the statues were owned by New Yorkcollector Maurice Tempelsman, who had paid a reported one million dollars forthem in 1980. Tempelsman's arrangement neatly accounts for the three-year

108. Lisa J. Borodkin, Note, The Economics of Antiquities Looting and a Proposed LegalAlternative, 95 COLUM. L. REv. 377, 405 (1995) (taxpayers are "the unwitting insurers of a questionablemuseum acquisition"); Ricardo J. Elia, Greece v. Ward: The Return of Mycenean Artifacts, 4 INT'L. J.CULTURAL PROPERTY 119, 123 (1995) (charitable contribution settlements allow possessors to escapethe possibility of outright forfeiture of the works).

109. See Ehl, supra note 105. But cf Senator Paul Sarbanes's statement that the "small amount ofmoney lost by the Internal Revenue Service in [the Ward Gallery settlement] is more than compensatedby the goodwill generated in Greece toward Americans" quoted in Jo Ann Lewis, The Golden Horde,WASH. POST, Feb. 1, 1996, at Cl.

110. See Ehl, supra note 105.111. For the functioning of the related use rule during the Ward Gallery settlement, see Robert

Anthoine, Deductions for Charitable Contributions ofAppreciated Property-The Art World, 35 TAX L.REv. 239, 239-52 (197919 CFR PART 12 1980).

112. University of Virginia Returns Rare Archaic Sculptures to Italy, Press Release, Jan. 3, 2008,http://www.virginia.eduluvatoday/newsRelease.php?id=3577; see also Elisabetta Povoledo, TwoMarble Sculptures to Return to Sicily, N.Y. TIMES, Sept. 1, 2007, at B7.

2010] 257


related-use rule, and the Italian government was likely to be content to wait insteadof engaging in costly and perhaps unsuccessful litigation. The possibility thatcollectors will look for similar a way to subsidize repatriation is growing ascountries begin to successfully demand the return of antiquities from privatecollectors, not just museums. 113

Repatriation demands for antiquities are increasingly likely. In 2005, an Italiancourt convicted Giacomo Medici, an Italian citizen, of dealing in illicitly excavatedantiquities. 114 The long investigations preceding this conviction resulted in theseizure of hundreds of looted antiquities and, more importantly, of the meticulousrecords kept by Medici and his accomplices. Among these records were, forexample, a series of Polaroid photographs showing antiquities fresh from theground, with dirt still clinging to them, and then under restoration, and then-in afew cases-in a museum display case with Medici himself posing next to them.These records showed the illegal export of the antiquities in question long afterthey became government property through Italy's national ownership laws,allowing Italy to successfully demanded the return of certain antiquities from thecollections of American collectors and museums, including the Getty Museum, 115

the Boston Museum of Fine Arts, 116 the Cleveland Museum of Art' 17 and theMetropolitan Museum of Art18 These museums have negotiated agreements withItaly instead of facing McClain-type lawsuits. Italy's investigation is ongoing. TheMedici records show that as the trade in smuggled antiquities has become morepervasive, it has also become more organized and thus more likely to producerecords which can aid in repatriation claims.

A donor facing a repatriation claim who makes an arrangement similar toTempelsman's will not be able to deduct the full fair market value of the donatedantiquity if he honestly reports the agreement to the IRS, since the valuation will bereduced to the limited value to the charity during the time it possesses the antiquity(similar to the reduction in deductions for partial gifts). However, even thisreduced value offers some compensation to a repatriating donor. In addition, giventhe large-scale tax fraud in the Thai antiquities cases, there is little reason to expectthat donors will always be so honest as to report their repatriation agreements to the

113. E.g., Greece Gets Antiquities Back from U.S. Collector, REUTERS, Sept. 3, 2008, available athttp://www.reuters.com/article/artsNews/idUSL340449420080903 (prominent collector Shelby Whitesurrenders a bronze vase and the upper part of a marble tombstone to Greece).

114. Italy's investigation into Medici and his associates is detailed in WATSON & TODESCHINI,supra note 53, at 283. See also Christine L. Green, Antiquities Trafficking in Modern Times: HowItalian Skullduggery Will Affect United States Museums, 14 VA. SPORTS & ENT. L.J. 35 (2007).

115. Catherine Elsworth, Getty Museum to return antiquities to Italy, TELEGRAPH, Aug. 2, 2007(Getty agrees to return forty objects to Italy because of Medici links).

116. Elisabetta Povoledo, Boston Museum Returns 13 Ancient Works to Italy, N.Y. TIMES, Sept.29, 2006, at E27.

117. Steven Litt, Cleveland Museum of Art strikes deal with Italy to return 14 ancient artworks,CLEVELAND PLAIN DEALER, Nov. 19, 2008, at 1.

118. Elisabetta Povoledo, Italy and U.S. Sign Antiquities Accord, N.Y. TIMES, Feb. 22, 2006, at E7(Metropolitan Museum of Art agrees to return 21 objects to Italy because of Medici links). Aaron KyleBriggs, Consequences of the Met-Italy Accord for the International Restitution of Cultural Property, 7CHI. J. INT'L L. 623 (2006-2007).

258 [33:2


IRS. For example, a donor in Tempelsman's situation could have received both thefull fair market value of his donation and the moral satisfaction of repatriation if hehad kept the repatriation agreement secret. For instance, the country of origin andthe museum could have agreed to re-open repatriation negotiations after threeyears.

B. WHAT REFORMS ARE NEEDED?

Although there have been many suggestions for reforms of the charitablededuction allowance in general, there have been few suggestions for the reform ofthe statute's functioning with reference to donated antiquities. Atwood seems tohave been the first to connect looting and the Tax Code, proposing in his 2004book that the IRS create a committee of experts to assess the provenance status ofdonated antiquities before allowing deductions. 119

In 2006, the IRS, concerned with inflated appraisals for donated artworks ingeneral, considered screening incoming returns for these deductions, but concludedthat this would not be cost effective, since many of the largest of these donationswere already flagged for review by the Art Advisory Panel, and donations of artwere under 4% of all charitable contributions in their sample year (2002).120 Sinceantiquities are a small percentage of this small percentage, it is unlikely that theIRS will establish a new screening procedure requiring action for all antiquitiesdonations.

However, there are ways in which the problems of donated antiquities could beaddressed without an unnecessary burden on the IRS. I propose that the appraisalof a donated antiquity must include a showing of satisfactory provenance beforeany deduction is allowed.

C. How SHOULD THE IRS VALUE DONATED ANTIQUITIES?

Lowering or completely eliminating the value of unprovenanced antiquitieswould sit well within the history of the IRS' valuation of art. In general, courtshave held that the tax valuation of an art collection is "inherently imprecise andcapable of resolution only by a Solomon-like pronouncement."1 21 Courts have

119. ROGER ATWOOD, supra note 53, at 245.120. Treasury Inspector General for Tax Administration, A FORMAL PROGRAM TO IDENTIFY

ARTWORK DONATIONS REPORTED ON TAX RETURNS IS NOT NECESSARY, BUT EXAMINATIONPROCEDURES NEED TO BE STRENGTHENED (Aug. 22, 2006), Reference Number: 2006-30-120,available at http://www.treas.gov/tigta/auditreports/2006reports/200610116fr.pdf.

121. Messing v. Comm'r, 48 T.C. 502, 512 (1967). See generally Ralph Lerner, Valuing Works ofArt for Tax Purposes, 28 REAL PROP., PROB. & TR. J. 593 (1993); John G. Steinkamp, Fair MarketValue, Blockage, and the Valuation ofArt, 71 DENV. U. L. REv. 335, 407-08 (1994); Internal RevenueService, VALUATION GUIDE FOR INCOME, ESTATE AND GIFT TAXES (CCH 1985) (manual used by IRSin Appeals Officer Valuation Training Program); John Bishop & Morton Lee, FEDERAL TAXVALUATION DIGEST (1983); JAMES BONBRIGHT, THE VALUATION OF PROPERTY (1937); EmanuelGordon, What Is Fair Market Value? 8 TAX L. REv. 35 (1952); JACK BOGDANSKI, FEDERAL TAXVALUATION (1996). Since valuation is most important within the Code for calculating estate tax, theestate tax valuation rules are far more systematic and detailed than the income tax valuation rules, which

2010] 259


generally been amenable to the IRS' re-valuations of art objects. 122 Thus, Karlensurveyed two dozen litigated cases of taxpayers seeking deductions for donations ofart and found that the tax court rejected the taxpayer's appraised value in themajority of the cases. 123

That the IRS does not need to prove the correctness of the reasons why itsvaluation is lower than the donor's was established by the Ninth Circuit in Dohertyv. Commissioner.124 There, the taxpayer donated a painting which his appraisalvalued at $200,000. The Art Advisory Panel valued the painting at $100, holdingthat it was a forgery. The court declined to decide whether the painting wasauthentic or not, but held that its value was $30,000, explaining that one factor inthis decision was that a dispute over the authenticity of a painting acts as adepressant on its value.

Just as the Art Advisory Panel can lower the value of a presumed forgery, so toocan the IRS lower the value of unprovenanced antiquities. This lowering of valuecan be explained in policy terms, as an adjunct to the general U.S. policy to lessenlooting. Public policy considerations have an important role in deciding the properform of tax rules, and such considerations have resulted in the disallowance ofcertain charitable deductions. 125 Moreover, Bonbright's classic functionalexplanation of the divergent methods of valuation for the purposes of taxation isthat valuation cannot take place "without reference to the purpose for which thevaluation is desired."126 In particular, Bonbright suggests that valuation should bemotivated by the policy rationales underlying particular tax provisions.12 7 The

often echo and sometimes explicitly incorporate by reference the estate tax valuation rules. For estatetax valuation rules, see Treas. Reg. § 20.2031-1-20.2031-10 and the similar gift tax valuation rules inTreas. Reg. § 25.2512-1-25.2512-9. However, even the estate tax valuation rules are almost silent onhow the value of property is to be determined. To answer this question, one must have recourse to caselaw and administrative rulings. Rulings on valuation issues are generally used interchangeably,regardless of whether the original dispute concerned valuation for the purposes of estate tax, gift tax,charitable deductions, etc. See, e.g., Anselmo v. Comm'r, 80 T.C. 872, 881 (1983), aff'd, 757 F.2d 1208(11th Cir. 1985) (applying estate and gift tax tests to determine deduction for charitable gifts).

122. For example, a court has rejected a donor's valuation of a painting in favor of the IRS' lowervaluation, whose amount was justified by its consideration of the painting's poor physical condition andlesser artistic quality than other works of the artist. See Furstenberg v. United States, No. 306-74, 1978U.S. Ct. Cl. LEXIS 663 (Ct. Cl. March 2, 1978).

123. Peter H. Karlen, Appraiser's Responsibility for Determining Fair Market Value: A Questionof Economics, Aesthetics and Ethics, 13 COLUM.-VLA J.L. & ARTS, 185, 219-220 (1989). By contrast,when a lower appraisal would be in the taxpayer's interest, as for estate taxes, the IRS usually raises theappraisal by an average of 101%. See Jessica L. Furey, Painting a Dark Picture: The Need for ReformofIRS Practices and Procedures Relating to Fine Art Appraisals, CARDOZO ARTS & ENT. L.J., 177, 178n.7 (1990). Thus, for example, the IRS has successfully demanded that estate taxes be based on theprices the works of art actually sold at rather than the lower pre-existing evaluations. Scull v. Comm'r,67 T.C.M. (CCH) 2953 (1994).

124. Doherty v. Comm'r, 63 T.C.M. (CCH) 2112 (1992), aff'd Doherty v. Comm'r, 16 F.3d 338(9th Cir. 1994).

125. See Bob Jones Univ. v. United States, 461 U.S. 574 (1983) (contributions to raciallysegregated private schools not deductible). See also the denial of deductions for contributions toCommunist-controlled organizations, 50 USC § 790, repealed by Pub. L. No. 103-199, 107 Stat. 2329(1993).

126. JAMES BONBRIGHT, 1 THE VALUATION OF PROPERTY 7 (Ist ed. 1937).127. Id.

[33:2260

TAx DEDUCTIONS AND UNPROVENANCED ANTIQUITIES

U.S. has clearly recognized the importance of stopping looting, as signaled by thevarious CPIA agreements and its signature of the 1970 UNESCO Convention,whose preamble notes that "cultural property constitutes one of the basic elementsof civilization and national culture, and . .. its true value can be appreciated only inrelation to the fullest possible information regarding is origin, history andtraditional setting."1 28 Tax donations which directly encourage looting or whichact as a form of insurance against repatriation claims do not follow this publicpolicy. Instead, such donations force the taxpayer to pay for looting-for activitiesdirectly contrary to that public welfare which is the very reason for the allowanceof charitable deductions.129

Alternately, the IRS could offer non-policy-based explanations for why theactual value of unprovenanced antiquities is low. One such explanation is that thepossibility of repatriation claims depresses the value of all unprovenancedantiquities. Fair market value is a question of fact to be determined from anexamination of the entire record. 130 As I have argued in Part II, the existence oflooting combined with the lack of other, legitimate sources for the unprovenancedantiquities now on the market means that part of the "entire record" to beconsidered when valuing an unprovenanced antiquity is the likelihood of its illegalexport from another country and thus of a future repatriation claim by this country.

The IRS need not consider the actual prices paid for antiquities whendetermining their value, since the probative value of actual sales is not always fullypersuasive to the courts. For example, courts have sometimes refused to accept asthe fair market value of corporate stock the inflated prices actually paid by"unskilled and unreasoning buyers and sellers" since these "unsophisticatedinvestors" were making purchases "without regard to the underlying financialstructure." 131 Similarly, collectors who purchased antiquities in willful ignoranceof the law of the country of origin overpaid for their purchases.

It is important for my argument that the donated antiquity be recognized by theIRS as having a low value at the moment of donation rather than plummeting invalue only when it is subject to a repatriation claim. Valuation is measured at thetime of donation, "not what a court at a later time may think a purchaser wouldhave been wise to give,"1 32 and cannot take account of inherent but hidden value.The Seventh Circuit offered an apposite metaphor to illustrate this concept:

128. 1970 UNESCO Convention, supra note 1, preamble.129. See David Schizer, Subsidizing Charitable Contributions: Incentives, Information and the

Private Pursuit ofPublic Goals (Columbia Law and Econ., Working Paper No. 327, 2008), available athttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=10 9 7 6 44 .

130. Lio v. Comm'r, 85 T.C. 56, 66 (1985), affd. sub nom; Orth v. Comm'r, 813 F.2d 837 (7thCir. 1987); see also Treas. Reg. § 1.1001-1(a).

131. Downer v. Comm'r, 48 T.C. 86, 94 (1967) ("unsophisticated investors"); Rogers v. Strong, 4USTC 1330 (D.N.J. 1933) (not officially reported), affd, 72 F.2d 455 (3d Cir.), cert. denied, 293 US621 (1934) ("unskilled and unreasoning buyers and sellers"). See also Dees v. Comm'r, 21 T.C.M.(CCH) 833 (1962) (prices paid for stock was not equal to fair market value because of high pressuresales tactics). But compare Freshman v. Comm'r, 33 B.T.A. 394, 403 (1935) (holding that 1929securities market prices were fair market value, not reflections of "a hysterical state of mind on the partof the speculative public").

132. W.T. Grant Co. v. Duggan, 18 F. Supp. 724, 726 (S.D.N.Y. 1937) (emphasis added), affd, 94

2010] 261


[I]t is apparent that an asset always has some theoretical, underlying value which isrevealed or made apparent by subsequent events. For example, an unsigned paintingby Botticelli languishing in a second hand art shop with a minimal price tag alwayshad the same inherent value which it acquires when the creator of the painting is laterdiscovered. In a second sense, however, value is a practical process, always changingin accord with the price that it will yield on the market at a given time. In this sense,the undiscovered Botticelli has a value far less than its "inherent" value. The Codeand the Regulations clearly enshrine this second sense of value. 133

However, no matter what the price tag an unprovenanced antiquity might wearat the moment of donation, the IRS may consider that its value takes into accountits lack of provenance. This lack is an obvious fact, not a hidden inherent valuesuch as the attribution to Botticelli is in the example above.

Under the precedent established by the McClain case, artifacts illegally exportedfrom a country where they were subject to national ownership laws are treated asstolen property in the U.S. 134 In the U.S., a good-faith purchaser of stolen goodscannot not acquire good title from a thief.135 A donor who exports an antiquity, orpurchases it from someone who has exported it contrary to the laws of a countrywhich has national ownership before the time of the export, does not have goodtitle. Thus, the donation of such a work should not result in a deduction, since theIRS has denied deductions in cases of other objects of which the taxpayer could notprove himself the legal owner. 136 Additionally, I argue that the value of anyunprovenanced antiquity is decreased by the possibility that the donor does nothave good title.

In some donations, the possibility of repatriation claims is more visible than inothers. For example, the collectors Leon Levy and Shelby White acquired theupper half of an ancient Roman statute of the "Weary Herakles" type in 198 1.137The lower half of the statue is in the Antalya Museum, in Turkey; plaster caststaken in 1992 demonstrated their perfect alignment. The Antalya half was found in1980 during archeological excavations at Perge, Turkey, a site which had beensubject to looting. The upper half has been on long-term loan to the BostonMuseum of Fine Art. 138 If it is eventually donated to the Boston Museum, as

F.2d 859 (2d Cir. 1938). See also Wendy Gerzog, McCord and Postgift Events, 113 TAX NOTES 349(Oct. 23, 2006); Wendy Gerzog, McCord: Value of Gifts Must Be "Tax Affected, " 113 TAX NOTES 913(Dec. 4, 2006).

133. Am. Nat'l Bank & Trust Co. v. United States, 594 F.2d 1141, 1144 n.2 (7th Cir. 1979).134. United States v. McClain, 545 F.2d 988 (5th Cir. 1977).135. U.C.C. § 2-403 (2006) ("A purchaser of goods acquires all title which his transferor had or

has power to transfer."). A thief or a good-faith purchaser of stolen goods can gain title through adversepossession. However, many states apply a statute of limitations rule to stolen art which is not favorableto the good-faith purchaser. New York, for example, has established a "demand and refusal" rule,holding that the statute of limitations for replevin cases when the object in question is a work of artbegins to run when the claimant has discovered the current possessor of the work, has demanded itsreturn, and has been refused. Menzel v. List, 267 N.Y.S.2d 804, 809 (Sup. Ct. 1966).

136. Hyde v. Comm'r, 81 T.C.M. (CCH) 1853 (1973) (taxpayer not entitled to deduct the casualtyloss from the demolition of a vehicle because he had not shown that he was the owner of that vehicle).

137. For the statue, see Mark Rose & Ogzen Acar, Turkey's War on the Illicit Antiquities Trade,GUIDE TO THE W. MEDITERRANEAN ARCHAEOLOGY, 45,49 (Mar./Apr. 1995).

138. The Museum has gone to impressive lengths to hypothesize on the legality of the statue,

262 [33:2


seems likely, should its valuation be affected by the possibility that judiciallyadmissible evidence will come to light of its looting, and thus show that thecollectors never had good title?

One difficulty in the way of my proposal is that the IRS has previouslyconsidered the issue of the value of stolen art in a Private Letter Ruling, holdingthat "the nature of ownership that is required for inclusion of property in adecedent's gross estate . . . [is] based upon a decedent's possession of the economicequivalent of ownership, rather than upon the decedent's possession of a technicallegal title."1 39 Thus, the IRS concluded that the fair market value of the stolenobjects (here, medieval German church treasures stolen by a U.S. serviceman in theaftermath of World War II) was "the highest price that would have been paid at [thetime of the decedent's death] whether in the discreet retail market or in thelegitimate art market."140 By "discreet retail market" the IRS presumably meansthe black market. However, it should be noted that this decision was in the contextof an estate tax case, where the IRS desired a higher valuation and the decedent'sfamily a lower one.

However, it is not necessary that an item have the same tax valuation for thepurposes of charitable deductions and estate tax. For example, the value of illegaldrugs can be included in an estate under this Private Letter Ruling's logic, but thereis no question that the IRS would not allow a taxpayer to take a charitablededuction for the fair market value of donated drugs. Similarly, the tax valuationof unprovenanced antiquities need not be symmetrical; they can have value as partof an estate but no value when offered as donations.

1. What Impact on the Market for Antiquities?

The goal of my proposal is to reduce incentives for the purchase ofunprovenanced antiquities. Fewer buyers will want to purchase unprovenancedantiquities if they know that no charitable deduction will be available for thatantiquity. Of course, this is a question of effects at the margin, since there aremany other factors-aesthetics, price, availability-impacting a decision topurchase an antiquity besides the thought of a future donation. However, evensmall reductions in the market for unprovenanced antiquities are valuable.Additionally, a tax rule separating provenanced from unprovenanced antiquitiesmight serve the important purpose of educating the public about provenance. Thus,the valuation rule might convince a buyer to purchase a provenanced antiquity, ornot to purchase an antiquity at all, rather than buy an unprovenanced antiquity.

proposing for example that the break was ancient and that the upper half was removed from Turkeybefore the relevant laws were passed. Id.

139. I.R.S. Priv. Ltr. Rul. 91-52-005 (Aug. 30, 1991)140. Id.

2632010]


2. What Impact on Scholarship?

A reduction in the market for unprovenanced antiquities would mean that fewerantiquities would be uncovered and made available to scholars. However, thiswould not lead to a decrease in scholarship, since the majority of archeologists andother scholars of antiquities refuse to work with unprovenanced objects. 141 inaddition to possibly encouraging looting, such objects offer little to scholarship.For example, archeologists learn about the past more from "context" thanindividual objects-"context," meaning the totality of information available froman excavated site. One archeologist has explained the importance of context bydescribing her excavation of flakes of obsidian, less than five millimeters indiameter, in the Paleolithic stratification of a trash heap in an archeological site ona Greek island. This obsidian had to be imported, and the position of the flakes inthe context of the Paleolithic layer, rather than a higher one, showed that thoseislanders and their trading partners had the sea-going capacities necessary to importobsidian millennia before scholars had previously thought. 142 Here, it was theexact placement of the chips that provided the information; the chips themselves,sold to an archeologist on the market, could not have revealed their importance. Toan archeologist, an unprovenanced antiquity is worthless, not only because it lackscontext but also because it is impossible to be sure that it is not a forgery. 143

3. What Impact on the Unprovenanced Antiquities Themselves?

Many buyers of unprovenanced antiquities justify their purchases on the basis ofthe preservation of the individual object. Unless they assume ownership, the objectmay be destroyed in the uncaring possession of a salesman. This worry is certainly

141. For example, the Society for American Archeology discourages its members from studyingworks on the antiquities market. SOCIETY FOR AMERICAN ARCHEOLOGY, PRINCIPLES OFARCHAEOLOGICAL ETHICS (1996), http://www.saa.org/AbouttheSociety/PrinciplesofArchaeologicalEthics/tabid/203/Default.aspx (Third Ethical Principle). See also LarryMurphy et al., Conunercialization: Beyond the Law or Above it? Ethics and the Selling of theArchaeological Record, in ETHICS IN AMERICAN ARCHAEOLOGY: CHALLENGES FOR THE 1990s 45, 47(Mark Lynott and Alison Wylie, eds., 2000) (explaining the authors' decisions not to study works on theantiquities market because "it is better to lose some information than actively to participate indestruction of the archeological record").

142. Karen D. Vitelli, Introduction to ARCHAEOLOGICAL ETHICS 17, 24-27 (Karen D. Vitelli ed.,1996). Another attempt to explain the importance of archeological context to non-archeologists is inBRODIE, DOOLE & WATSON, supra note 58, at 10-12.

143. For example, the Director of the Dumbarton Oaks Museum stated that "[o]bjects outside theircontext . . . are almost without scholarly value." Giles Constable, The Looting ofAncient Sites and theIllicit Trade in Works ofArt, 10 J. FIELD ARCHAEOLOGY 482, 484 (1983). Again, Vitelli claims thatunprovenanced objects for sale on the antiquities market "are NOT ... the results of archeology. Ifarcheology is the study of past peoples through careful recovery and documentation of their materialremains-all the material remains, the fullest possible context-then these objects without context arenot just the result of bad archaeology, but represent the antithesis of archeology. ... They have lost theirarcheological value.. . .They are without specific context, the only information that can guarantee theirauthenticity and that can give them value for archaeological interpretation." Karen D. Vitelli, TheAntiquities Market, 6 J. FIELD ARCHAEOLOGY 75, 76 (1980).

264 [33:2


justified, since the continued preservation of antiquities, which can be vulnerable tolight, temperature, humidity and handling, is an expensive proposition.

Thus, it is possible that my proposed tax treatment of unprovenanced antiquitiesmay lead to the "stranding" of a number of antiquities. First, a reduction in demandfor antiquities would not immediately be communicated to the looters who supplythe market, leading to a period of "overproduction." Second, a reduction in theincentive to donate might mean that current possessors of unprovenancedantiquities would be less likely to give their antiquities to museums, leading to ageneral decrease in preservation, as museums are better able to preserve antiquitiesthan are private collectors. However, the price of decreasing the preservation levelof the antiquities currently above ground is the necessary cost of preserving themuch greater value of the in-context, buried antiquities-those which will be lootedif the market continues to demand antiquities regardless of provenance.

IV. CONCLUSION

The current rules governing the charitable donation of antiquities, complex asthey are, fail to meet the crucial policy goal of reducing the demand for lootedantiquities. Changing these tax rules to have an impact on this demand is only oneof the many governmental and private actions that need to occur to ensure that theshort-sighted present does not completely destroy the value of the past.

2010] 265

Thompson: The Relationship between Tax Deductions and the Market for Unprovenanced Antiquities

Documents

Transcript of Thompson: The Relationship between Tax Deductions and the Market for Unprovenanced Antiquities