Over the course of some 20 years, art dealer and collector Ileana Sonnabend negotiated with federal regulators over a prized possession: "Canyon," a work by artist Robert Rauschenberg that combines a painting, a rope-trundled pillow and a stuffed bird. The problem was the bird—a young bald eagle of obscure origin. And now, five years after Ms. Sonnabend died, the problem continues to be the bird. Under federal statutes that prohibit any traffic in bald eagles or their remains, the artwork cannot legally be sold to anyone. And yet the Internal Revenue Service is demanding that Ms. Sonnabend's heirs pay $40 million in taxes on "Canyon." It's the sort of case where you wonder if the IRS agents are named Willem and Franz.
The mantle of art provides little mediation or mitigation when it comes to endangered species. When Lawrence M. Small was made secretary of the Smithsonian Institution a little more than a decade ago, he let some magazines photograph his collection of Amazonian tribal art, much of which was made of feathers of protected rain-forest birds. The articles and photos were perused with keen interest at the U.S. Fish and Wildlife Service, which soon began an investigation. That he considered the items art made no difference—Mr. Small eventually pleaded guilty to federal misdemeanor violations of the Migratory Bird Treaty Act.
Does it help if the artwork is famous? Perhaps, as art lawyer Ronald Spencer notes, it is "bad public relations to destroy works of art," and that can temper the urge to seize. Still, counting on enforcement agencies to be reasonable is a dicey strategy. What is deemed all right under one administration might be discovered to be not all right at all once different officials are in place. The stuffed bird adorning "Canyon" first caught the attention of Fish and Wildlife Service agents in 1981, when the artwork came back through U.S. Customs after a European tour. The Interior Department seems to have been rather accommodating at the time, giving Ms. Sonnabend a permit to hang on to the piece.
But it was a different story in 1998 when she tried to lend "Canyon" to an international retrospective of Mr. Rauschenberg's work. Federal officials notified the gallery it would have to "relinquish the carcass to the U.S. Fish and Wildlife Service" or donate the artwork to a nonprofit museum—unless "the carcass was taken from the wild prior to 1940" (when the Bald Eagle Protection Act became law).
But how to prove that? This is when the gallery again enjoyed the benefit of regulatory discretion. Mr. Rauschenberg was allowed to simply swear before a notary-public that the eagle was old enough to be legal. He told a quirky story about how the bird had come into his possession. It seems that an artist friend living in an apartment above Carnegie Hall rescued the dingus from the trash in 1959. The eagle, the story went, had belonged to an aged tenant who in his youth "was a member of Teddy Roosevelt's Rough Riders." According to Mr. Rauschenberg's notarized statement, "this Rough Rider acquired, from the wild, a bald eagle which he had taxidermed prior to 1940." When the old cowboy had died, his family tossed the unwanted bird in the garbage. Though the artist was recounting a third-hand tale of an unknown, unnamed cavalryman he had never met, Mr. Rauschenberg's account was accepted as appropriate documentation. Who said the feds can't be reasonable?
Not everyone gets such benefit of the doubt. Just imagine if Gibson Guitar Corp.—locked in a dispute with the Fish and Wildlife Service over the legality of foreign wood sourced for its instruments—had ever tried to offer proof of provenance as flimsy as the artist's notarized statement. But then again, in its dispute Gibson chose not to make nice. The company has been challenging Fish and Wildlife rulings in court. Which might help explain why, a year ago, heavily armed and body-armored agents descended on the company's Nashville factory to seize guitars and pallets of wood.
The Sonnabend heirs would ultimately find out how unreasonable enforcement agents can be. When the IRS first came looking for some payment on the unsalable "Canyon," the tax agency told an attorney working for the estate, Ralph E. Lerner, that the artwork was worth $15 million. But the lawyer refused to agree to that number, insisting that, because there is no legal market for the painting, it has no dollar value. Then, in what Mr. Lerner described to Forbes as the "most shocking part" of the whole fiasco, all of a sudden the IRS issued an official Notice of Deficiency declaring the Rauschenberg to be worth $65 million. Which would suggest that the market value of going along to get along is somewhere around $50 million.
The IRS valuation isn't necessarily crazy, even if its justification—the idea that an imagined black-market value should be binding on people not engaged in black-market transactions—is. But thanks to federal law, that value is entirely hypothetical.
How arbitrary is it to take a good off the market and then demand taxes be paid on an imaginary, indeed illegal, market price? The circumstances may be rare and peculiar, but the capriciousness of officials appears to be all too common.
