## Facts

- In 1969, George and Emelia Doherty bought a painting titled *Attacking Stagecoach*, possibly by Charles M. Russell, for $10,000.
- In 1982, they donated a 40% undivided interest to the Charles M. Russell Museum and claimed a $140,000 charitable deduction.
- In 1983, they donated the remaining 60% interest and claimed a $210,000 charitable deduction.
- The Commissioner challenged the claimed $350,000 total valuation and asserted the painting’s value was minimal, issuing deficiency notices for 1982 and 1983.
- In the Tax Court, the Dohertys’ expert opined the painting was authentic; the Commissioner’s expert opined it was not, citing stylistic features inconsistent with Russell.
- The Tax Court found that doubt as to authenticity would materially reduce market price and determined fair market value at the contribution dates was $30,000, sustaining income tax deficiencies.
- The Dohertys appealed, arguing the Tax Court improperly relied on post-donation circumstances when valuing the painting.

## Issues

1. Whether the Tax Court improperly relied on post-contribution “facts and circumstances” by considering later-articulated doubts about the painting’s authenticity in determining fair market value at the donation dates.
2. Whether the Tax Court’s $30,000 fair market value finding was clearly erroneous in light of the competing expert testimony.

## Decision

- The Ninth Circuit affirmed the Tax Court.
- The court held the Tax Court could consider the valuation effect of authenticity doubts where the facts supporting those doubts existed at the time of the contributions, even if the doubts were first articulated later.
- The court held the $30,000 valuation was not clearly erroneous.

## Legal Principles

- Fair market value is the price at which property would change hands between a willing buyer and willing seller, neither under compulsion, both with reasonable knowledge of relevant facts.
- Valuation may account for later-developed evidence that reveals conditions or facts that existed on the valuation date, so long as those facts would have affected a hypothetical buyer’s and seller’s pricing.
- For artwork, uncertainty as to authenticity can materially depress fair market value relative to comparable works with undisputed authenticity.
- Tax Court valuation findings are reviewed for clear error; appellate courts defer when the trial court weighs conflicting expert testimony and makes supported credibility and value determinations.

## Conclusion

The Ninth Circuit upheld the Tax Court’s $30,000 valuation of the donated painting and the resulting deficiencies, ruling that later-articulated authenticity doubts may be considered in determining fair market value when grounded in facts that existed at the time of the charitable contributions.


Doherty v. Commissioner, 16 F.3d 338 (9th Cir. 1994)