What is the fair market value of an object that cannot be sold? That’s the lead of this New York Times piece focusing on the intrinsic value of Canyon, a masterwork of 20th-century art created by Robert Rauschenberg. Because the work, a sculptural combine, includes a stuffed bald eagle, a bird under federal protection, it would be a felony if anyone ever tried to sell. So the appraisers have valued the work at zero.

Two key insights:

The 1940 Bald and Golden Eagle Protection Act and the 1918 Migratory Bird Treaty Act make it a crime to possess, sell, purchase, barter, transport, import or export any bald eagle — alive or dead. Indeed, the only reason Mrs. Sonnabend was able to hold onto “Canyon,” Mr. Lerner said, was due to an informal nod from the United States Fish and Wildlife Service in 1981.

But the Internal Revenue Service thinks the sculpture has a larger value (to the of $65 million) and is demanding that the owners pay $29.2 million in taxes. So if the owners of the painting can’t sell it, how is the IRS coming up with a non-zero market value for Canyon? Turns out, it is possible that someone overseas may want to purchase the painting illegally. But the NYT points out:

Still, the notion that the I.R.S. might use the black market in this way to determine a fair market value has surprised some tax experts. James Joseph, a tax lawyer with Arnold & Porter in Washington, noted that the I.R.S. has taxed illegal contraband at its market value, but added: “I don’t know of any instance where the I.R.S. has assumed taxpayers will engage in an illegal activity in order to value their assets at a higher amount. Al Capone went to jail for not paying income taxes on his illegal income, but this is very different than that.”

A very interesting Catch-22 in the art world.