I have a question about an answer that I read on Reddit's r/eli5 (Explain like I'm five) subreddit. The question was "How do rich people use tax donations as write-offs to save money? Wouldn't it be more financially beneficial to just keep the money and have it taxed?" This is something I have wondered about, too. How do you gain if you donate something of value and then only get a fraction of that back in tax savings?
The top rated answer to that question includes this quote:
When I was younger, I was on the young alumni board for the university I went to for undergrad and we used to see this all the time. Someone would donate property/illiquid securities/art/etc with an 'assessed' value of (say) $10M, but when the school went to sell it, they'd only realize (say) $3M in cash. But the guy would still get to keep the $10M tax deduction. To a guy like that, a $10M tax deduction could be worth $4m to $5M easily.
But I don't understand this. How can a $10M deduction be worth $4-5M to a wealthy taxpayer?