Navigating Art Donation Tax Rules: Guidelines and Precautions

The IRS is intensifying efforts against inappropriate deductions linked to inflated art valuations for tax purposes, caution Meaghan Gregg, Justin Cohen, and Samantha Lauri from Hughes Hubbard & Reed.

Taxpayers should anticipate defending substantial deductions for art donations and confirm that the charity utilizes the artwork to advance its tax-exempt mission. Engaging a reputable appraiser with strong credentials is essential, alongside maintaining detailed records. Art donation deductions exceeding $5,000 mandate a qualified appraisal and Form 8283. Consider securing an IRS value statement for artworks valued at $50,000 or more to sidestep audits and penalties. The IRS art advisory panel's review of appraisals can result in value adjustments, with outcomes varying.

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