It very well might. A thinly traded asset with limited (but expensive) price history, independent assessors willing to attest to its inherent uniqueness...

It's distinct from "lying" about the value - you're intentionally manipulating the market price. Which, actually, is more or less legal for collectibles (unregulated by the SEC) even if you were explicit about it, which you wouldn't be.

Worst case is after taking you to court you're forced to revise the value down somewhat.

http://qz.com/103091/high-end-art-is-one-of-the-most-manipul...

In many jurisdictions, it is on the tax authority to prove that a certain transaction was not using an at arms length valuation.

If Rothko paintings are usually valued at 15x the size of the canvas, multiplied by an arbitrary dollar amount, and the person who structured this has the evidence to back this up, good luck to the tax authority winning that argument.

I've heard stories about collectors buying up 10 Picasso paintings, 3 of them really wanted by collectors, and 7 of them being 'mediocre' (if you could call any Picasso mediocre). As a set, they can be sold for $100M. Even though the acquisition value might only have been $50-$70M.

That said, how do you value a rare painting? Should the painting be worth $1M or $10M, but it's just hard to sell, that doesn't mean it's not worth the actual value. Should you deny a tax deduction just because it's a very illiquid asset? After all, the same reasoning often applies to houses (and other illiquid assets).

I can't see it as lying. It is a thinly traded asset with limited price history.