The LA Times lead a story from page one today on the wide-spread abuse of the deduction available for the charitable donation of art allowed under the current tax code (Link). Analysis of IRS data by the Times found that of the taxpayers who were audited for this deduction more than 52% had their appraisals rejected by the IRS, and almost 96% of appraisal errors favored the taxpayer.
The rules around the deduction make the deduction wide open to abuse if you can find a "sympathetic" appraiser or approved charity or non-profit organization willing to overpay for some quid-pro-quo in the background, which the LA Times in fact hints at in the article.
The chances of being audited, though, appear very slim. The article points out that in a broader decline in the number of overall audits, only 7 taxpayers out of 108,554 who claimed the deduction for charitable donations of art were audited in 2004! With numbers like that, the odds are obviously stacked in favor of those willing to be "aggressive" in their use of the deduction.
Rules for the claiming a tax deduction for the donation of art.