Lisa, a calendar year taxpayer subject to a 32% marginal Federal income tax rate, claimed a Form 1040 charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $160,000. The applicable overvaluation penalty is:

Question

Quizplus · Accepted Answer

The overvaluation penalty is 30% of the overvaluation amount, which is $250,000 - $160,000 = $90,000. 30% of $90,000 is $27,000. However, the maximum penalty is $10,000, so the applicable penalty is $10,000.

Lisa, a Calendar Year Taxpayer Subject to a 32% Marginal