Don't Mess With Taxes

OK. The GOP vice presidential candidate won't let this die a natural death, so here goes another look at Sarah Palin's pricey campaign wardrobe.

Over the weekend, the Alaska governor told a campaign rally crowd in Tampa, Fla., "You know, I tried to just ignore it because it’s so ridiculous."

Then she chose not to ignore it, blaming the Republican National Committee. That group actually shelled out the $150,000 for Palin's new suits and accessories from Saks Fifth Avenue and Neiman Marcus (blogged here).

"Those clothes, they are not my property," Palin said. "Just like the lighting and the staging and everything else that the R.N.C. purchased. I’m not taking them with me. I’m back to wearing my own clothes from my favorite consignment shop in Anchorage, Alaska."

Own the clothes, baby: However, in today's issue of Tax Analysts, contributing editor Lee A. Sheppard takes another tax look at Palin's wardrobe problem.

And Sheppard says Palin should rethink her plans to give back the duds.

Instead, Palin should keep the clothes, report their value as taxable income and then donate them herself.

By doing so, she might get quite a nice deduction because the clothes, says Sheppard, will be worth more than the amount usually allowed for contributions of unwanted attire.

Increased value: How so? Two reasons, says Sheppard.

1. Regardless of the outcome of the election, Palin is already a historical figure and that adds value to clothes she wore.
2. She doesn't have to donate them to the typical thrift and resale shops. Palin could give her suits and accessories to other qualified 501(c)(3) nonprofits that would provide her a better tax outcome.

Say, perhaps, a museum.

Several American museums, including the Metropolitan Museum of Art, have important clothing collections, notes Sheppard: And the items in those collections are there because they have what collectors call "provenance," meaning that even if the clothing's design value isn't great, the articles are important because Palin wore them.

Sheppard writes:

"The ivory silk shantung Valentino jacket Palin wore at her Republican convention acceptance speech may be worth as much or more than its reported $2,500 retail price, depending on what a museum or collector would be willing to pay. Potential purchasers would want a complete outfit and photographs of it being worn at a historically important event. Palin might be able to achieve a wash result for the convention outfit. The same significance would not attach to outfits worn for smaller appearances."

Of course, just like any contributor to a nonprofit, Palin will be responsible for determining the value of her gift. So, says Sheppard, she'll probably have to sell an outfit or two to establish a benchmark price for her clothes, or go to a dealer in antique clothing for an appraisal, to set a value to report when she donated the clothes.

Are you listening, Sarah?

I know you like your items from Out of the Closet and you certainly can slip right back into them as soon as you get back safely inside Alaska's borders. 

But think about Sheppard's idea for a minute. It might be nice to show up at a few Anchorage holiday parties in some of those fancy city duds.

Other label notes: Sheppard also notes, for the record, that Michelle Obama wears Armani and MaxMara, Cindy McCain wears Escada, and Hillary Clinton's campaign wardrobe was Valentino. 

And she asks, "Are we piling on?" Maybe, with "we" being all us journalists and bloggers who keep writing about what's in Palin's closet. 

But, notes Sheppard, "It's not our fault that Palin is providing the most interesting tax questions of the candidates. Our value added is to discuss, in detail, the law applicable to the situation."

About the author: Sheppard knows of what she speaks when it comes to haute coture. This New York Times profile of the attorney-turned-tax-author notes, "In the breadth of one paragraph, she can write authoritatively about accounting for uncertainty in income taxes and the latest Marc Jacobs handbag with Art Deco-style jewel-encrusted clasps."