"Effective evaluation date was date of death."
That doesn't really answer the question. Normally, if an item was sold fairly "close" to the date of the previous owner's death, then the selling price should be taken as the fair market value of the item, regardless of the appraisal. The appraiser could be wrong and misjudge the market, for example. You wouldn't have a house or car drop 75% in value in 5 months unless something major happened to the market or the home. You obviously weren't concerned enough to put a reserve on the item or pull it from auction when the best offer was less than 1/3 the appraisal.
Now, "close" is tricky because all kinds of strange things can affect the art market. If the artist died between the death of the owner and the sale, the price at sale might be much more than the FMV on the date of death. If the artist was suddenly revealed to have signed their name to lesser works done by students, the price might plummet.
I think that if you were claim a basis of 800 and a selling price of 250 so you could claim a capital loss, the IRS might be doubtful about that. If nothing major happened to the market for that artist during only 5 months, the IRS would probably say the appraisal was wrong and the true FMV was much closer to 250 than 800.
(Of course, if you are talking about $250 and $800, the amounts are so small that the IRS is not likely to care. If we are talking about $250K ($250,000) and $800,000 (and you just abbreviated) then you should probably pay for professional advice.
