March 10, 2007

Tax No-No: Don't Inflate Your Deductions by 6x (duh)

For those of you working on your taxes trying to figure out all of your charitable donations from the past year, keep in mind that it's probably a bad idea to try and claim deductions six times the fair value of your donation. TaxProf Blog has a post about a court case involving a Goldman Sachs investment banker who made $115k and tried to deduct $55k in used clothes donations. While the tax court found that the fair value of the clothing donation was only $9k, amazingly enough it found that the Goldman investment banker was not negligent in overestimating the value of her donation. So, how in the world do you explain $9k in used clothing? From the Tax Court's ruling:
According to [the Goldman banker], she routinely purchases designer clothing and shoes, wears the items once or twice, and then donates them to an upscale thrift shop in New York, New York.
That's terrific. My only question is how in the world she found the time to do all of this shopping, especially given the legendary hours that i-bankers are known to work.



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