My understanding is that you can only deduct your expenses. If you were a bricklayer and donated a patio you can only deduct the cost of bricks and mortar, for which you have a real value and receipts, but you are on your own for the labor.
In my state, and I have attended two seminars on both problems, the city wants sales tax on portraits because there is a lot of art income. It is specifically noted. The state has two points of view. It is a tangeable good, so it should be taxed, but since it is commissioned, as in the client decides size, subject and materials, it is a service and only declare the service of painting it as income.
If you donate $200 to an auction and deduct it, and the buyer donates $150 to buy it and deducts it, there is not a real market value (and somehow both of you are deducting the same actual goods) IF you give the picture to your accountant and a bunch of brochures, and he tells all of his clients to go get a painting done and hands out a card with every tax return, the painting is a business expense, as a display piece would be, for advertising and a whole different ball of wax.
Well, that is how I understand it and I am sure some one else will set me straight soon.
dj*
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