Michael Rushton has a post on the Elkins decision which closes with the following: "If art was previously being treated inequitably in the tax code, and the inequity was rectified, great. But if the result is to give special privileges to collectors not available to others, it needs a close and critical look."
Without addressing the larger point he raises, let me just say: Art was previously being treated inequitably in the tax code, and the inequity was rectified.
In a nutshell, the issue is as follows. Suppose I have a $10 million Picasso and I want to sell you a 40% ownership share. What is that 40% share worth? You might say $4 million (40% of the $10 million total value), but if you think about it, that isn't right because then you'd be stuck co-owning the piece with me, so there would be all sorts of hassles and complications involved (who gets to hang it on their wall and for how long, shipping and insurance issues, etc.) and, most important of all, you might not be able to sell it when you want or need to (because I might not agree). So while you would certainly pay something for that 40% interest, you wouldn't pay $4 million. You would demand a ("fractional interest") discount. There's nothing controversial about that, it's well-established with other sorts of assets (e.g., real estate). But for some reason the IRS insisted on treating art differently. That inequity has now been rectified.
UPDATE: Rushton responds here. He's troubled by the tax avoidance motive behind the transaction, which is fair enough (though as Learned Hand said: "Any one may so arrange his affairs that is taxes shall be as low as possible; ... there is [no] patriotic duty to increase one's taxes"). But if that's a problem, it's a problem across the board for fractional discounts. There was no reason for the IRS to single out fractional discounts for art for different treatment.
UPDATE 2: Rushton once more.