Vander Hook v. Commissioner

In February 1972, Dennis M. Vander Hook purchased a fractional interest in a collection of six paintings from Legal Dynamics, Inc. Dennis and his wife, Judy (plaintiffs), later donated this interest to Pepperdine University. In 1972 and 1973, the Vander Hooks claimed charitable-contribution deductions for the donation of their interest in the paintings, with the total value of the claimed contribution for both years being $12,000. The Internal Revenue Service (IRS) (defendant) disagreed with the Vander Hooks about the value of their interest and allowed only a $1,200 tax deduction. The IRS then issued a notice of deficiency, which the Vander Hooks challenged in tax court. At trial, the Vander Hooks asserted that all of the paintings were authentic and offered expert testimony from Harry Muir Kurtzworth, who appraised the collection of paintings at $272,000. The IRS argued that five of the paintings were inauthentic and offered expert testimony from Kenneth Donahue, the director of the Los Angeles County Museum of Art. Donahue asserted that five of the paintings were inauthentic and supported his opinion with analysis of other paintings in the relevant artists’ oeuvres. Kurtzworth, by contrast, demonstrated negligible familiarity with other works by the relevant artists and lacked any affiliation with a reputable museum, gallery, or art institution. He also admitted to inflating his initial valuation of the paintings at the request of Legal Dynamics. The tax court considered both experts’ opinions to determine the fair market value of the Vander Hooks’ fractional interest in the collection for tax-deduction purposes.