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Bosses at the shop have now confirmed the item in question is set to be sold off and the proceeds handed to charity.

A representative for Kamofie + Company tells TMZ.com, "We have decided to sell the diamond necklace through auction, and give the proceeds to charity. We invite the public to make suggestions as to the most appropriate charity to receive the benefit of the sale's proceeds."

The necklace is currently being held as evidence by the Los Angeles County District Attorney and the sale won't be held until after Lohan's legal case is resolved. She is due back in court on Thursday (10Mar11).

The news comes just days after the actress threatened to sue store bosses for allegedly striking a $40,000 deal to release CCTV tapes which show Lohan trying the necklace on.