Giving a gift twice

However, I think one should do the calculations required by line 10 Taxable Refunds. The following sounds logical: Say the donors standard deduction is $6000 and the itemized deduction if they did not donate the $5000 item was $1000 or less, then then they did not get a benefit from deducting the painting, so no other income. If their itemized deduction without the painting was between $1000 and $6000, then the donation of the painting is worth (itemized deduction without painting - $1000). And only if their itemized deduction without painting was $6000 or more do they report the full amount as Other Income.

If his marginal rate is 25%, he has a tax savings of $250 versus selling the painting for $5000. An economically rational person would have sold the painting. But if the taxpayer was economically irrational, you are correct.

Dick