LaCharles made a charitable contribution of property that he valued at $80,000 . He deducted this amount as an itemized deduction on his tax return. The IRS can show that the actual value of the property is $50,000 . LaCharles is in the 33% Federal income tax bracket. Determine LaCharles's amount due for both tax and any penalty
The § 6662 penalty for an individual applies when the tax understatement exceeds $5,000 and the valuation used is 150% or more of the correct value.
LaCharles' underpayment of tax is $9,900 (33% tax bracket × $30,000 overvaluation). Thus, the penalty for overvaluation is 20% of this amount, or $1,980.
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