Juarez (a calendar year taxpayer) donates a painting to a local art museum (a qualified charity).The painting cost Juarez $2,000 ten years ago and,according to one of Juarez's friends (an amateur artist),now is worth $40,000.On his income tax return,Juarez deducts $40,000 as a Form 1040 charitable contribution.Upon later audit by the IRS,it is determined that the true value of the painting was $30,000.Assuming that Juarez is subject to a 25% marginal Federal income tax rate,his penalty for overvaluation is:

Question

Quizplus · Accepted Answer

The Answer of Juarez (a calendar year taxpayer) donates a painting to a local art museum (a qualified charity).The painting cost Juarez $2,000 ten years ago and,according to one of Juarez's friends (an amateur artist),now is worth $40,000.On his income tax return,Juarez deducts $40,000 as a Form 1040 charitable contribution.Upon later audit by the IRS,it is determined that the true value of the painting was $30,000.Assuming that Juarez is subject to a 25% marginal Federal income tax rate,his penalty for overvaluation is:

Juarez (A Calendar Year Taxpayer) Donates a Painting to a Local