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It’s mostly about buying a future tax deduction.

(1) Buy this thing now for $100,000.

(2) Wait a few years.

(3) Donate it to a museum or other charity at a valuation of $400,000.

(4) Take a $400,000 charitable contribution deduction on your taxes.

I don’t deny that this behaviour exists, but I don’t understand why it is allowed to exist. I understand it in the context of donating assets with a liquid market, like stocks and bonds, but for illiquid, difficult to value assets like these or art, it seems like a mega opportunity for tax evasion that could easily be cracked down upon.

At least have a “claw back” where if the charity then sells the thing for $100,000 then the donor has to retract the full value of the original deduction.

The problem is that most of the time the new valuation is real. In the case of art at least, there is an extra step between 2 and 3: create hype to make the artist popular.

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