Compute the Overvaluation Penalty for Each of the Following Independent

question 132

Essay

Compute the overvaluation penalty for each of the following independent cases involving the taxpayer's reporting of the fair market value of charitable contribution property. In each case, assume a marginal Federal income tax rate of 35%. $\begin{array}{llrr}&\text {Taxpayer}&\text {Corrected IRS Value}&\text {Reported Vabue}\\\text { a. } & \text { Individual } & \$ 10,000 & \$ 20,000 \\\text { b. } & \text { C corporation } & 10,000 & 30,000 \\\text { c. } & \text {S corporation } & 10,000 & 30,000 \\\text { d. } & \text {Individual } & 100,000 & 175,000 \\\text { e. } & \text {Individual } & 100,000 & 250,000 \\\text { f. } & \text { C corporation } & 100,000 & 500,000\end{array}$

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Definitions:

Permanent Accounts

Balance sheet accounts that carry their ending balances over into the next accounting period, such as assets, liabilities, and equity accounts.

Accumulated Depreciation-Equipment

The total depreciation that has been recorded against a company's equipment since it was put into service.

Depreciation Expense-Equipment

The allocation of an equipment's cost over its expected useful life to reflect its decrease in value over time.

Income Statement Columns

Sections in an income statement that categorize financial data into revenue, expenses, profits, and other relevant financial information for analysis.