Sketchy promoters are targeting wealthy people with false promises about the potential tax savings from buying and donating art for charitable-giving deductions, according to the IRS.
The agency has conducted more than 60 audits leading to more than $5 million in additional taxes relating to exaggerated appraisals and claims for charitable deductions, the IRS
"Creativity in art is a beautiful thing, but aggressive creativity in art donation deductions can paint a bad picture for people pulled into these schemes," IRS Commissioner Danny Werfel said in a statement. "This is another example where people should be careful when it comes to aggressive marketing and promotions. There are legitimate ways to claim an art donation, but taxpayers should be careful to understand the rules and watch out for inflated values or questionable appraisals."
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The promoters often tell high-income people they're getting them a discount on the art and arranging for storage, shipping, appraisals and donation of the pieces they portray as being significantly more valuable than the price, according to the agency. Tax professionals and the IRS have been raising alarms in recent years about similar overstated promotion of the employee retention credit, which
Red flags surrounding potential art donation deductions include buying several works by the same artist with "little to no market value outside of what the promoter might be advertising" and appraisals with missing information about "rarity, age, quality, condition, stature of the artist, price paid and the quantity purchased," according to the IRS. The
