Final answer:
The Center Art Galleries-Hawaii, Inc. v. United States case involved a gallery's tax fraud scheme, using fake art valuations to enable buyers to claim high tax deductions illegally.
Step-by-step explanation:
The legal issue in the Center Art Galleries-Hawaii, Inc. v. United States case concerns a tax fraud scheme orchestrated by the gallery. The gallery sold art at inflated prices, claiming the artworks were limited-edition Marc Chagall lithographs, amongst others, and then provided customers with fraudulent appraisals to justify the prices. This enabled buyers to claim unwarranted charitable deductions on their tax returns. The United States (U.S.) government's campaign, 'Operation Bogart,' led to the gallery's indictment for mail and wire fraud, as well as money laundering.
The central legal question was whether the art gallery's actions constituted criminal offenses under U.S. law, specifically mail and wire fraud statutes, and money laundering. This case emphasizes the importance of authenticity and accurate valuation in art transactions and the implications of fraudulent behaviors on U.S. tax regulations and law.