Originally Posted by
thedoorchick
There may be business reasons for donors inflating values assigned to these items, but for tax purposes, the deduction cannot be greater than the cost (for a business), so there is no tax advantage to inflating these amounts.
At charity auctions, donors usually receive a letter from the charity thanking them for the gift of the [donor-named value of item]. Not for the fair market value. At a museum gala I'm involved in, the values are often inflated well above what the item is sold for in the auction. The values are justifiable (like what it might bring on a good day at Sotheby's) but not realistic for the limited audience and the location.
I don't know if the IRS challenges this during an audit, but I'd think since the charity issues the donor a gift letter, the donor/ taxpayer would have a good case for that amount in his deductions.
At least with art, the actual cost basis can be years or generations in the past.