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Palin's Shopping Spree Will Bump Her Into Higher Tax Bracket

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Here's another piece of legal arcana for Gov. Sarah Palin and the Republican National Committee to mull over. According to a prominent tax lawyer who spoke to the Huffington Post on background, even if the $150,000 worth of clothes provided to the GOP vice presidential nominee are donated to charity after the election, Palin will be bumped into a higher tax bracket when she pays taxes on their retail value.

"The circumstances under which clothing is not taxable are rather limited," the lawyer said, adding that "I don't think she has much of a case at all."

The RNC has thus far sought to defend the legality of its expenditures by calling them "gifts" to Palin, as opposed to an illegal transfer of campaign funds for personal use by the candidate. But as another tax expert pointed out to ABC's Jake Tapper earlier this week, such "gifts," while kosher for the RNC, would still need to be declared by the candidate as income on her 2008 tax return.

Taking Palin's 2007 declared salary ($124,000) as a baseline, the lawyer who spoke to the Huffington Post said the $150,000 in gifts -- even if donated to charity after the election -- would take Palin from the 25 percent tax bracket to 33 percent bracket. The lawyer estimated that would increase Palin's tax liability by approximately $45,000. "It gets a little complicated by the Alternative Minimum Tax, which she might get caught up in," the lawyer added.

Still, isn't there a charity deduction Palin could take if and when the clothes are donated, as McCain has guaranteed will happen?

According to the lawyer, that charity deduction would only cover 18 percent of the total value of all gifts needing to be declared. The lawyer estimated that deduction could marginally change Palin's tax bracket standing, and result in a $9,000 reduction in total liability -- meaning an overall additional tax burden of about $36,000 for Palin when she files next year.

An email to a McCain spokesperson asking whether Palin would commit to paying taxes on gifts donated to charity after the election was not immediately returned.

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