Harold, a calendar year taxpayer subject to a 35% marginal tax rate, claimed a Form 1040 charitable contribution deduction of $20,000 for a sculpture that the IRS later valued at $10,000. The applicable overvaluation penalty is:

Question

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The overvaluation penalty applies when the claimed value is 150% or more of the correct value. Here, $20,000 is exactly 200% of $10,000, so the penalty applies. However, the penalty is not calculated as a simple percentage of the overvaluation; it is based on the tax underpayment resulting from the overvaluation. Since the question does not provide enough information to calculate the tax underpayment, the penalty cannot be determined from the given options.

Harold, a Calendar Year Taxpayer Subject to a 35% Marginal