Recent Chagall Authenticity Determination Spotlights Common Challenge in Art Investing

As is the case with many investment types, art can be a volatile asset. Even beyond the natural twists and turns that the valuation of a piece of work may take, dependent upon factors such as the reputation of the artist and the age, condition and scarcity of the work, authenticity adds tremendous uncertainty to the equation. A recent example of this has come to light (explained in this New York Times article) whereby art owner Stephanie Clegg stands to lose her piece entirely, as a panel of experts wants to destroy it. The Chagall expert panel has deemed it as a fake, citing that it lacked presence, as a result of what was presented to Clegg as a routine review and a necessary formality in order to sell her work with the art auction house Sotheby’s, who also sold the artwork to Clegg originally. In this case, Clegg purchased the work more than 20 years ago, and the period of time in which Sotheby’s warranted her work (in which she might have sued for misrepresentation or inaccuracy on Sotheby’s part) was just five years.

Art authenticity has always been a nebulous part of the art investment world. In the cited instance, the Comité Marc Chagall, which was created to authenticate works attributed to the artist, issued a verdict that Chegg’s painting was an amalgam of Chagall’s other works, but “lacked presence” – an identifying factor undoubtedly hard to discern, even for a Chagall scholar or curator. Clegg has found herself on an unfortunate side of an authenticity determination, but historically, many decisions have been reversed years or even decades later. A contrasting example is that of “Salvador Mundi” which was once thought to be painted by an obscure artist until 2017, when experts decided that it was the work of Leonardo da Vinci. As a result, the price soared from $1,175 to $450 million. Conversely, in 1973, the Metropolitan Museum of Art conducted an overhaul of its collection after believing that roughly 300 paintings by Rembrandt, Goya, and Vermeer had been misattributed.

In instances when art is destroyed or confiscated, the investor’s portfolio suffers a loss. In this case, Clegg purchased the piece attributed to Marc Chagall for $90,000 at a Sotheby’s auction, and had it appraised for $100,000 in 2008.  In these unfortunate circumstances, it is best to consult your tax advisor in order to understand the tax implications of the loss.

Since a piece’s “presence” can be viewed as a key identifying factor, it begs the question of whether art authentication, like art appreciation, is a bit subjective. Investing in works that bring one joy and inspire curiosity may be the only guaranteed satisfactory outcome. Additionally, if a collector purchases a piece of work with the intention of selling, it may be worth factoring in the period for which the art house guarantees the work (in Chegg’s instance, five years), capitalizing on the likelihood that the art house would accept responsibility for any missteps in authentication.

For more information or to discuss matters related to art and other unique assets, contact Michael Belfer and Tara Burek, Co-Leaders of Anchin’s Art Specialty Group, at [email protected] and [email protected].