Crosby Garrett Helmet on auction at Christies

Archives of American Art - Arshile Gorky Fiorello La Guardia at the opening of the Federal Art Gallery - 2127

Albert Josef Franke Beim Antiquitätenhändler

Marie-Gabrielle Capet - Studio Scene - WGA4049

Art valuation, an art-specific subset of financial valuation, is the process of estimating the

market value Market value or OMV (Open Market Valuation) is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with ''open market value'', ''fair value'' or ''fair market value'', although the ...

works of art A work of art, artwork, art piece, piece of art or art object is an artistic creation of aesthetic value. Except for "work of art", which may be used of any work regarded as art in its widest sense, including works from literature ...

. As such, it is more of a financial rather than an

aesthetic Aesthetics, or esthetics, is a branch of philosophy that deals with the nature of beauty and taste, as well as the philosophy of art (its own area of philosophy that comes out of aesthetics). It examines aesthetic values, often expressed th ...

concern, however, subjective views of cultural value play a part as well. Art valuation involves comparing data from multiple sources such as art

auction houses An auction is usually a process of buying and selling goods or services by offering them up for bids, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition ex ...

, private and corporate collectors,

curators A curator (from la, cura, meaning "to take care") is a manager or overseer. When working with cultural organizations, a curator is typically a "collections curator" or an "exhibitions curator", and has multifaceted tasks dependent on the parti ...

, art dealer activities, gallerists (gallery owners), experienced consultants, and specialized market analysts to arrive at a value. Art valuation is accomplished not only for collection, investment, divestment, and financing purposes, but as part of estate valuations, for charitable contributions, for

tax planning Tax avoidance is the legal usage of the tax regime in a single territory to one's own advantage to reduce the amount of tax that is payable by means that are within the law. A tax shelter is one type of tax avoidance, and tax havens are jurisdict ...

, insurance, and loan collateral purposes. This article deals with the valuation of works of

fine art In European academic traditions, fine art is developed primarily for aesthetics or creative expression, distinguishing it from decorative art or applied art, which also has to serve some practical function, such as pottery or most metalwork. ...

, especially

contemporary art Contemporary art is the art of today, produced in the second half of the 20th century or in the 21st century. Contemporary artists work in a globally influenced, culturally diverse, and technologically advancing world. Their art is a dynamic c ...

, at the top end of the international market, but similar principles apply to the valuation of less expensive art and

antique An antique ( la, antiquus; 'old', 'ancient') is an item perceived as having value because of its aesthetic or historical significance, and often defined as at least 100 years old (or some other limit), although the term is often used loosely ...

Historic valuation and contemporary art

The source of a work's artistic

charisma Charisma () is a personal quality of presence or charm that compels its subjects. Scholars in sociology, political science, psychology, and management reserve the term for a type of leadership seen as extraordinary; in these fields, the term "ch ...

has long been debated between artists who create and patrons who enable, but the charismatic power of artworks on those who would possess them is historically the initial driver of value.Balfe, Judith, Ed., Paying the piper: causes and consequences of art patronage, Univ. of Illinois Press, 1993, p.307. .Jeffri, Joan, Philanthropy and the American artist: A historical overview, '' The European Journal of Cultural Policy'', 3(2), 2009, pp. 207-233. In the 1960s that charismatic power started edging over to accommodate commercialized culture and a new industry of art, when aesthetic value fell from prominence to parity with Pop art and

Andy Warhol Andy Warhol (; born Andrew Warhola Jr.; August 6, 1928 – February 22, 1987) was an American visual artist, film director, and producer who was a leading figure in the Art movement, visual art movement known as pop art. His works explore th ...

's idea of business art, a recognition that art has become a business and making money in business is an art.Kuspit, Donald
Art Values or Money Values?
ARTnet.com, 6 March 2007. One of many artists to follow Warhol is Jeff Koons, a stockbroker turned artist who also borrowed imagery from popular culture and made millions.Littlejohn, David, Who is Jeff Koons and Why Are People Saying Such Terrible Things About Him? ''Artnews'', April 1993, p. 94.Inflatable investments, The volatile art of Jeff Koons
''

The Economist ''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Econo ...

'', 28 November 2009. For collectors, the emotional connection felt toward a work or collection creates subjective personal value.How to Value Art
artnet.com, retrieved 21 November 2011. The weight assigned by such a collector to that subjective measure as a portion of a work's overall financial value may be greater than that by an art speculator not sharing the collector's emotional investment, however, non-economic value measures such as "Do I like it?" or "Does it speak to me?" still have economic effect because such measures can be deciding factors in a purchase.Campbell, R.A.J.
Art as a Financial Investment
Erasmus Univ., Rotterdam, Maastricht Univ., 2007. In contrast, the Art Dealers Association of America (ADAA) suggests that the key issues are authenticity, quality, rarity, condition, provenance and value.

Valuing art

Art valuation activity concerns itself with estimating market demand, estimating

liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liqu ...

capability of lots, works, and artists, the condition and

provenance Provenance (from the French ''provenir'', 'to come from/forth') is the chronology of the ownership, custody or location of a historical object. The term was originally mostly used in relation to works of art but is now used in similar senses i ...

of works, and with valuation trends such as average sale price and mean estimates.See artnet.com'
Market Trends FAQ
As with other markets, the art market uses its own industry-specific

terms of art Jargon is the specialized terminology associated with a particular field or area of activity. Jargon is normally employed in a particular communicative context and may not be well understood outside that context. The context is usually a particu ...

or vocabulary, for example, "bought-in", describing the disadvantageous situation occurring when a work or lot at auction is returned to its owner having been passed over, withdrawn or otherwise unsold.Kendzulak, Susan, definition of
Bought-In
, about.com. See also

, teachmefinance.com. Accessed 20 June 2012. Valuing art is also necessary when a piece is to be used as collateral. The art-lending market has expanded to an estimated $15 billion to $19 billion of loans outstanding in the USA. The shift in Asia towards investment in western art is a factor that has allowed art lending companies to launch offices in Asia as western works are often easier to use as collateral.

Market demand

As in the housing market, "

comparables Comparables (or comps) is a real estate appraisal term referring to properties with characteristics that are similar to a subject property whose value is being sought. This can be accomplished either by a real estate agent who attempts to establish ...

" are used to determine what level of demand similar items have in a current market. The freshness of the comparables is important because the art market is fluid and stale comparables will yield estimates that may have little relation to a work's current value. Subject matter and the

medium Medium may refer to: Science and technology Aviation *Medium bomber, a class of war plane * Tecma Medium, a French hang glider design Communication * Media (communication), tools used to store and deliver information or data * Medium of ...

of a work also affect market demand, as does rarity.

Liquidity

Liquidity in the art market means having artworks in very high demand and being able to sell those works without impediment. Art sales slow in downturns resulting in the market becoming more illiquid. There is a greater degree of liquidity risk facing the art investor than with other financial assets because there is a limited pool of potential buyers, and with artworks not reaching their reserve prices and not being sold, this has an effect on the auction prices. In a divorce action between a couple who sought to divide a $102 million collection between them, the couple decided a sale would prove problematic because selling the entire collection and dividing the profit would saturate the market and drive down prices; in reporting on the case, ''

The Seattle Times ''The Seattle Times'' is a daily newspaper serving Seattle, Washington, United States. It was founded in 1891 and has been owned by the Blethen family since 1896. ''The Seattle Times'' has the largest circulation of any newspaper in Washington s ...

'' described the case as a study on how people measure the value of art, and which counts for more — pragmatism or sentiment.Armstrong, Ken
The art of divorce: She gets the Monet, he gets the Renoir
, Local News ''The Seattle Times'', seattletimes.nwsource.com, 28 July 2012. Accessed 2012-7-30. The newspaper reported that one of the two litigants had a more sentimental view of the value of the works, while the other had a more businesslike view, wanting balance and diversification. The newspaper attempted to calculate the value of the many artworks at issue in the case by determining a per-square-inch price based on each piece's value divided by its dimension, to end up with a per-square-inch price to apply to the amount of wall space the businesslike litigant wanted to cover with the available art. ''The Times'' ultimately concluded that using this formula as between the litigants,

John Singer Sargent John Singer Sargent (; January 12, 1856 – April 14, 1925) was an American expatriate artist, considered the "leading portrait painter of his generation" for his evocations of Edwardian-era luxury. He created roughly 900 oil paintings and mor ...

's ''Dans les Oliviers à Capri'' was valued at $26,666.67 per square inch, that the sentimental litigant received $3,082 of appraised value per square inch while the businesslike litigant received $1,942 per square inch, but could cover more wall space.

Valuation trends

Trends for values from the world's top auction houses are compared for study of market direction and how that direction affects given artists and works.Higgs, H. and Worthington, A.
Financial Returns and Price Determinants in the Australian Art Market, 1973–2003
''Economic Record'', 81:113–123, 2005-06. Worthington, AC and Higgs, H
A Note on Financial Risk, Return and Asset Pricing in Australian Modern and Contemporary Art
''Journal of Cultural Economics'', 30(3), March 2006, 73-84. Valuations for art sold at the market's top houses usually carry more weight than valuations from less established houses, as most of the top houses have hundreds of years of experience.Kendzulak, Susan

About.com lists the top houses (as of April 2014, and this list is volatile) as: : 1 & 2. Bonhams, and Bonhams & Butterfields (London, New York, Los Angeles, Sydney, Hong Kong, Dubai, and San Francisco) : 3. Christie's (London, Paris, Milan, New York, Hong Kong and Dubai) : 4. Dorotheum (Vienna, Brussels, Düsseldorf, Munich, Milan and Rome) : 5. Heritage Auctions (Dallas, Beverly Hills and New York) : 6. Phillips de Pury & Company (New York and London) : 7. Sotheby's (London, Hong Kong, Geneva, Milan, Paris, Zürich, New York, Toronto, Doha) : 8. Stockholms Auktionsverk (Stockholm) : 9. Tajan (Paris and Monaco) : 10. Villa Grisebach Auktionen (Berlin) : 11. Waddington's (Toronto) Long term economic trends can have a great impact on the valuation of certain types of work. In recent decades the values of historic Russian and Chinese art have greatly benefited from increased wealth in those countries creating new and very rich collectors, as the values of Orientalist and

Islamic art Islamic art is a part of Islamic culture and encompasses the visual arts produced since the 7th century CE by people who lived within territories inhabited or ruled by Muslim populations. Referring to characteristic traditions across a wide ra ...

had earlier been boosted by oil wealth in the Arab world.

Participant activity

One of many factors in the primary market's price of a living artist's work is a dealer's contract with an artist: many dealers, as stakeholders in their artists' success, agree to buy their own stable of artists' work at auction in order to prevent price drops, to maintain price stability, or to increase perceived value, or all three, thus dealers bidding on their own artists at auction have a direct impact on the selling price for those artists' works and as a result, the valuation of those works.Thornton, Sarah
The reinvention of artist Damien Hirst
''The Sunday Times'', 2009-10-04, Retrieved 23 November 2011.

Research data

Research data available from art auction houses such as Christie's, Sotheby's, Phillips,

Bonhams Bonhams is a privately owned international auction house and one of the world's oldest and largest auctioneers of fine art and antiques. It was formed by the merger in November 2001 of Bonhams & Brooks and Phillips Son & Neale. This brought tog ...

, and

Lyon & Turnbull Lyon & Turnbull is a privately owned international auction house based in Scotland. It is Scotland's oldest auction house founded in 1826. It is the largest independent auction house in the United Kingdom outside of London and one of the faste ...

are those tracking market trends such as yearly lot transactions, bought-in statistics, sales volume, price levels, and pre-auction estimates.For an example see artnet.com's sample report
Market Performance Report for Piet Mondian
There are also companies such as ArtTactic utilizing art auction data as providers of art market research analysis.For example, arttactic's monthl
Rawfacts newsletter
. Information available from internet-based art sale history databases generally does not include the condition of a work, a very important factor, therefore the prices quoted in those databases reflect auction

hammer price In auctions, the buyer's premium is a charge in addition to the hammer price (i.e. the winning bid announced) of an auction item, or lot. The winning bidder is required to pay both the hammer price and the percentage of that price called for by the ...

s without other, crucial valuation factors. Additionally, the databases of auctioned work do not cover private sales of works, and thus their use for art valuation is but one source among many needed for determining value.

General valuation factors

Valuation estimates by auction houses are typically given in ranges of prices to offset uncertainty. Generally, estimates are made by looking at what a comparable piece of art sold for recently, with estimates given in a range of prices rather than one fixed figure,de Pury, Simon
FAQ #13
and in the case of

especially, having few comparables or when an artist is not well known and has no auction history, the risks of incorrect valuation are greatest. One potential factor in valuation are the seller's reasons for selling a particular work and/or the buyer's reasons for buying, neither of which may have anything to do with the other. For example, a seller may be motivated by financial need, boredom with a particular artwork, or the desire to raise funds for a different purchase.Cornish, Audie
Wealthy Use Art Collections As Way To A Better Loan

NPR National Public Radio (NPR, stylized in all lowercase) is an American privately and state funded nonprofit media organization headquartered in Washington, D.C., with its NPR West headquarters in Culver City, California. It differs from other n ...

, npr.org, 3 October 2012. Accessed 29 January 2013. Common motivations include the so-called three D's: death, debt and divorce. Buyers may be motivated by market excitement, may be acting in accord with a collection plan, or buying like buyers of stock: to drive value up or down either for themselves or for another person. One method for pricing pieces by new artists of uncertain value is to ignore aesthetics and consider, besides market trends, three semi-commoditized aspects: "scale" - size and level of detail, "intensity" - effort, and "medium" - quality of the materials.Why A Dead Shark Costs $12 Million
NPR, npr.org, 25 June 2010. Accessed 2010-07-27. Archived from the original at archive.org. Valuing artworks in such a specialized market, therefore, takes into account a wide variety of factors, some indeed in conflict with each other.

Valuation for tax and other law-related purposes

In the United States, art bought and sold by collectors is treated as a

capital asset A capital asset is defined as property of any kind held by an assessee, whether connected with their business or profession or not connected with their business or profession. It includes all kinds of property, movable or immovable, tangible or in ...

for tax purposes,Capital asset defined: 26 U.S.C
§ 1221
Legal Information Institute, law.cornell.edu. Accessed 14 November 2015. and disputes relating to the valuation of art or the nature of

gain Gain or GAIN may refer to: Science and technology * Gain (electronics), an electronics and signal processing term * Antenna gain * Gain (laser), the amplification involved in laser emission * Gain (projection screens) * Information gain in de ...

on its sale are usually decided by the federal Tax Court, and sometimes by other courts applying federal tax law to specific cases.

Important U.S. cases

:*'' Crispo Gallery v. Commissioner'' (need to produce credible

documentary evidence Documentary evidence is any evidence that is, or can be, introduced at a trial in the form of documents, as distinguished from oral testimony. Documentary evidence is most widely understood to refer to writings on paper (such as an invoice, a con ...

of valuation as taxpayer has ultimate burden of persuasion),Andrew Crispo Gallery, Inc. v. Commissioner
86 F.3d 42 1996 affg. T.C. Memo. 1992-106. :*''Angell v. Commissioner'' (

fraud In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compensa ...

perpetuated upon the

IRS The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory tax ...

through inflated appraisals),Angell v. Commissioner
T.C. Memo 1986-528, aff'd 861 F.2d 723 (7th Cir. 1988). :*''Drummond v. Commissioner'' (cannot claim gain from art sale as

income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For ...

from business unless actually in the business),Drummond v. Commissioner
T.C. Memo. 94-16958; an
appeal
155 F.3d 558, (4th Cir. 1998), affg. in part & rev. in part (via vlex.com). Both accessed 17 November 2015. :*''Estate of Querbach v. A & B Appraisal Serv.'' (appraiser's liability for misidentifying a painting),Estate of Querbach v. A & B Appraisal Serv., No.L-089362-85 Supr. Ct N.J., Bergen County, 1987, ''in'' Orenstein
Show Me the Monet: the Suitability of Product Disparagement to Art Experts
''George Mason Law Review'', 13(4), Summer 2005, pp. 905–934 at 912–913 & fn. 66. :*''Estate of Robert Scull v. Commissioner'' (previous sales of the same property without subsequent events affecting value are generally strong indicators of

fair market value The fair market value of property is the price at which it would change hands between a willing and informed buyer and seller. The term is used throughout the Internal Revenue Code, as well as in bankruptcy laws, in many state laws, and by several ...

),Estate of Scull v. Commissioner, 67 T.C. Memo. 2953 (1994) (CCH) 1994-211 as cited by ''Walford v. Commissioner'', T.C. Memo. 6506-86 (2003). :*''Nataros v. Fine Arts Gallery of Scottsdale'' (in the absence of fraud or negligent misrepresentation, buyers believing they have overpaid at auction because of bad advice bear a heavy burden of proof),Nataros v. Fine Arts Gallery of Scottsdale
126 Ariz. 44, 612 P.2d 500 (Ct.App.1980). ''See also'' Dufy, Raoul
When Ishmael Called
Artinfo, 28 April 2009. Accessed 17 November 2015. :*''Williford v. Commissioner'' (the 'Williford Factors' test: eight factors to determine whether property is held for investment or held for sale).Williford v. Commissioner, 64 T.C.M. (CCH) 422 (1992) fn. 13. The eight 'Williford factors' are: (1) frequency and regularity of sales; (2) the substantiality of sales; (3) the duration the property was held; (4) the nature of the taxpayer's business and the extent to which the taxpayer segregated the collection from his or her business inventory; (5) the purpose for acquiring and holding the property before sale; (6) the extent of the taxpayer's sales efforts by advertising or otherwise; (7) the time and effort the taxpayer dedicated to the sales; and (8) how the sales proceeds were used.