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§9.2 GEMS• Two donors contributed lithographs to a charitable organization. Theyclaimed that each lithograph had a value of $300. The IRS contested thisvaluation. The court found that each lithograph had a value of $100. 15 Onappeal, the court wrote: “This was an interesting tax-saving arrangementdevised as an art transaction, but the art will have to be treasured for art’ssake and not as a tax deduction.” 16• Individuals made a gift of posters to a charitable organization. Theyasserted a value of $5 per poster; the court allowed a deduction on the basisof 73 cents per poster—the amount originally determined by the IRS. 17• Individuals contributed works of art to a charitable organization. Thevalue selected by the court for nine of these items was about halfwaybetween the donor’s values and the government’s values. 18Gifts of art are likely to be subject to the appraisal requirements. 19 Penaltiesapply to the overvaluation of property for tax purposes 20 and these penalties arefrequently applied in the context of a gift of artwork.(b) LoansRather than contribute a work of art to a charitable organization, a person may decideto loan the artwork to a charity. 21 This type of transfer does not give rise to a federalincome tax charitable contribution deduction. The transaction is nonetheless a gift.The transaction is disregarded as a transfer for gift tax purposes, however, when:• the recipient organization is a charitable entity, 22• the use of the artwork by the charitable donee is related to the purpose orfunction constituting the basis for its tax exemption, and• the artwork involved is an archaeological, historic, or creative item of tangiblepersonal property. 23§ 9.2 GEMSContributions of gems may be made to a charitable organization. Essentially, the lawconcerning the deductibility of gifts of works of art is applicable in this context. 24The specter of tax shelter abuse hangs over these gifts, however, because of the variousdeduction promotion schemes that have unfolded in this area in recent years.Once again, the principal issue in this setting is the value of the items transferred.What follows are some examples of court opinions concerning the valuationof gems for charitable deduction purposes.15 Orth v. Commissioner, 813 F.2d 837 (7th Cir. 1987).16 Id. at 843.17 Ferrell v. Commissioner, 53 T.C.M. (CCH) 209 (1987).18 Winokur v. Commissioner, 90 T.C. 733 (1988).19 See Chapter 10.20 See § 10.14.21 See, e.g., Priv. Ltr. Rul. 200223013.22 That is, an organization described in IRC § 501(c)(3).23 IRC § 2503(g).24 See § 9.1. 271