The special tax penalty imposed on appraisers:

Question

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The special tax penalty imposed on appraisers applies if the appraiser knew that the appraisal would be used in preparing a Federal income tax return. This penalty is intended to discourage appraisers from inflating property values to benefit taxpayers who may try to claim excessive tax deductions. The penalty is equal to the greater of $1,000 or 10% of the underpayment of tax resulting from the appraisal. It can also be as much as 200% of the appraisal fee that was charged. Therefore, option A is the correct choice. Option B is incorrect because the knowledge of whether an appraisal will be used in preparing a Federal income tax return is an important consideration for appraisers, and they are expected to exercise due diligence in determining the intended use of their appraisals. Option C is incorrect because the penalty is not a fixed percentage of the appraised value of the property, but rather a percentage of the underpayment of tax resulting from the appraisal. Option D is partially correct, but incomplete, as it is only one of the possible outcomes of the penalty and not the sole criteria for determining the amount of the penalty.

The Special Tax Penalty Imposed on Appraisers