Georgio, a calendar year taxpayer subject to a 33% marginal Federal income tax rate, claimed a Form 1040 charitable contribution deduction of $300,000 for a sculpture that the IRS later valued at $120,000. The applicable overvaluation penalty is:

Question

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The overvaluation penalty is 40% of the understatement of tax attributable to the overvaluation. In this case, the understatement of tax is $60,000 ($180,000 deduction claimed - $120,000 IRS valuation). The amount of the penalty is then 40% of $60,000, or $24,000.

Georgio, a Calendar Year Taxpayer Subject to a 33% Marginal