In Parts 1 and 2, we heard about the legal travails of Treasure Salvors, Inc., who found and salvaged the wreck of the Nuestra Senora de Atocha. But the curse of curios-in-curiae didn’t end there: even buying, owning, selling, or donating Atocha artifacts had legal ramifications.
- Perdue v. Comm’r of Internal Revenue, T.C. Memo 1991-478 (1991): Franklin P. Perdue (of the chicken Perdues? Anybody know?) acquired some Atocha artifacts in liew of repayment of a $90,000 loan he mad made to TSI in 1982. He later donated them to the National Museum of American History and deducted his estimate of their value from his federal income tax return as a charitable contribution. To calculate the value, he used the “point system” devised by the State of Florida to determine its expected share of the artifacts when it still believed the wreck lay in state waters (see Part 1). Florida had made point evaluations on his artifacts, and the state committee’s report estimated that the “optimum value” of Atocha artifacts under “special marketing conditions” was $54 per point. So Perdue used these figures as the fair market value of his charitable contribution, about $375,000 (a lot more than the $90,000 loan). The IRS disagreed with his estimate of the artifacts’ value.
Like most valuation disputes, the trial was mainly a “battle of the experts.” The IRS experts argued that the numismatic and precious-metal values should control the valuation, but Perdue’s expert argued that artifacts from a famous wreck had “glamour value” over and above similar antiquities from the same era and culture. The court agreed with Perdue’s expert, stated that the loan value was not a good measure of fair-market value because TSI was financially desperate at the time, and looked to situations where similar articles customarily change hands. Artifacts had been selling in the Mel Fisher Museum for $39-42/point, but had sold at a Las Vegas auction for $54-108/point.
The court found the fair-market value to be about $311,000; Perdue still owed tax, but no negligence penalties because his calculations had a reasonable basis (the state Division Committee’s report and a court order that used the same figure), and the difference wasn’t enough to trigger penalties for understatement or tax-motivated transaction.
- Ferman v. Comm’r of Internal Revenue, T.C. Memo 1994-541 (1994). The Fermans, the Brabsons, and some of their friends formed a partnership to buy artifacts salvaged from the Atocha and Santa Margarita. The two couples each donated some of their personally-owned silver coins to the Tampa Museum, and the partnership donated a silver bar, a silver coin, and a copper ingot. They sought expert valuation of the artifacts and deducted the resulting values from their tax returns as charitable contributions. The IRS contended that the artifacts were worth only about half of what the taxpayers claimed.
The taxpayers’ expert, who had appraised the coins, was a salvager and writer who had been involved with several related appraisal projects, but was not a professional appraiser. He used the Florida point system and the “glamour value,” much like Perdue in the previous case, basing his values on sales of similar items in the Fisher museum gift shop. The IRS expert was the same numismatist who testified in the Perdue case, but this time factored in auction sales of comparable coins. One might expect this case to come out very similarly to the Perdue case, but it did not. One difference the court noted was that Perdue’s artifacts were distinctive, highly publicized, and discovered before the main “mother lode” of artifacts. By contrast, the Fermans’ and Brabsons’ coins were discovered in the “mother lode” trove of 116,000 just like it, which depressed the market for silver Atocha coins even though the Fisher Museum gift shop did not lower its prices. Similarly, the silver bar found with over 950 others in the mother lode should not have been given the same number of points as one found beforehand and highly publicized. The court also found the taxpayers’ expert less credible than the IRS expert because the the former had devoted comparatively much less time to following the antique coin market. Accepting the IRS expert’s valuation in all cases, the court found the taxpayers liable for additional tax and extra interest due to overvaluation of more than 150% in a tax-motivated transaction.
(And who knows: maybe federal tax courts would rather see artifacts go to federal, rather than state, museums? Probably not, but maybe I’ll collect some more empirical data in my copious spare time . . .)
- DeCosmo v. Fisher, 683 So. 2d 659 (Fla. App. 1996): Theodore DeCosmo owned and operated the Mel Fisher’s World of Treasure Museum in Orlando. Mel’s daughter Taffi, who helped salvage the Atocha, loaned DeCosmo about $427,000 worth of the artifacts that made up her share, so that DeCosmo could display them in the museum. In a separate deal, DeCosmo arranged to buy $1 million worth of Atocha artifacts from Mel and TSI, and made a $40,000 down-payment. The night before the museum was scheduled to open, the deal fell through, and Taffi bore the bad news to DeCosmo that TSI would not sell him any artifacts. DeCosmo then refused to return Taffi’s loaned collection until TSI returned his down payment. Taffi sued for replevin (old-school legalese for “gimme my stuff back”). DeCosmo countersued and filed a third-party complaint against TSI for breach of contract and related torts.
The trial court dismissed the third-party complaint, dismissing some counts with prejudice (“don’t even try this one again”) and some without (“you can try again if you change some things” – in this case, a separate lawsuit rather than a third-party complaint piggybacked onto this one). The trial court also ordered DeCosmo to return Taffi’s collection as a matter of summary judgment (a “shortcut” judges will sometimes grant when no important facts are disputed and the law is clear): Taffi may be Mel’s daughter and a TSI employee, but the collection was her personal property and had nothing to do with the disputed DeCosmo-TSI contract. The Appeals Court affirmed; DeCosmo had admitted in his deposition that he might have known Taffi’s collection was her private property, and had treated it as such when he returned some of the coins to her.
A 1986 made-for-TV movie about the Atocha salvage is out on DVD: Dreams of Gold, starring Cliff Robertson (“Uncle Ben” in the Spider-Man movies) and Loretta Swit (“Hot Lips Houlihan” in the M*A*S*H* TV series). I have not seen it yet, but it got a good user review in ImdB.