Question

• Sabrina estimates the value of her donation to be approximately $6,000. Sabrina recently learned that because her donation exceeds $5,000, she must support her donation with an appraisal and signed statement by the appraiser on Form 8283. Sabrina decides to claim a charitable deduction of $4,900 to avoid the appraisal requirement.
  1. If Sabrina gets an appraisal that states the value of the clothes is $6,000, how much tax deduction will she receive for the clothes?
  2. If Sabrina’s clothes are worth $6,000, is she better off getting the appraisal or reporting a deduction of $4,900? What information would you need to answer this question?
  3. Does Sabrina’s reporting $4,900 violate tax law and/or ethical standards?
  4. Do you think the IRS has reason to be suspicious of contributions that fall just below $5,000? Why?

Answer 1

In United States, the Internal Revenue Service (IRS) collects taxes and enforces tax law. The IRS employs a complex set of rules and regulations regarding reportable and taxable income, deductions, and credits. The agency collects taxes on all forms of income, such as wages, salaries, commissions, investments, and business earnings.

A. If Sabrina gets an appraisal that states the value of the clothes is $6,000, she might receive $1000 tax deduction.

B. She is better off getting the appraisal.

C. No

D. No. Any contributions more than $10,000- $25,000 can be considered suspicious.