Ken donated a painting to the Hamilton City Art Museum. He acquired the painting

Question

Ken donated a painting to the Hamilton City Art Museum. He acquired the painting 20 years ago at a cost of $10,000. Ken had the painting appraised by the owner of a Hamilton art store, a qualified art appraiser, who estimated its value at $50,000. Ken believed the painting was worth more than $50,000, so he had it appraised by an art dealer from Chicago. The Chicago art dealer, also a qualified art appraiser, appraised the painting at a value of $120,000. Ken itemized deductions and took a charitable contribution deduction of $120,000. Was Ken justified in taking a deduction based on the higher appraisal? Justify your answer

Explanation / Answer

If the painting has been genuinely appriased and it is actually worth $120,000, then K is justified in taking a deduction based on the higher appraisal because he is actually donating an asset worth that amount. It is not ethically wrong to take a deduction on a higher appraisal if the appraisal is genuine and not affected by the intention of taking a higher deduction.

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