Scams come in various shapes and sizes, as do those that are affected by it. This became extra apparent to me last week when I saw headlines from the IRS concerning art donation scams.
Immediately this catches some attention because who even has art to donate in the first place? Obviously, we quickly assume that we are dealing with a small subset of the population, and one that is rather wealthy. And the IRS has promised that it is shifting some of its attention to high-income taxpayers, so maybe this is an indicator that it is true. Essentially what this scheme comes down to is that scammers encourage the taxpayer to buy some art (generally not worth much but portrayed as coming at a discounted price). This may also come with various fees, such as storage, shipping, and arranging appraisals and the eventual donation. After waiting at least a year from the purchase date, the purchasers are then encouraged to donate the art and claim a tax deduction for an inflated fair market value. This scam fits amongst those that are based on truth. A taxpayer can definitely claim a charitable deduction for an art donation, and this could be rather valuable if you made a purchase that then turned out to be worth much more than you paid for it. Like everything else when it comes to your tax return, though, this needs to all be properly documented, and if it is not, there could be rather significant consequences. This scam also fits among many that say just enough about its potential truth without giving you everything you should know to make an informed decision. The IRS notice lists things such as rarity, age, quality, condition, stature of the artist, price paid, and the quantity purchased as things that one would need to know to determine value and that the scammers don’t provide. The notice also notes that IRS has a team of professional appraisers that provides assistance to it when valuing these pieces. Call that another attention-grabber, for those are not amongst the people we imagine when the IRS comes to look deeper into a return. I know that this article is not going to reach many (and quite likely no one at all) who has been involved in significant art donations as charitable deductions. I do think, however, that it serves as a good warning/example of how things that are too good to be true often are. So when that happens, that little extra bit of discovery time serves us well – no matter who we are. Warmly, Josh Bousquet Connect to Us ~ Facebook ~ Twitter To ensure we don't make the folks at the IRS ornery, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
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