Max (A Calendar Year Taxpayer)donates a Painting to a Local

question 113

Multiple Choice

Max (a calendar year taxpayer) donates a painting to a local art museum (a qualified charity) .The painting cost Max $12,000 ten years ago and,according to one of Max's friends (an amateur artist) ,is worth $50,000.On his income tax return,Max deducts $50,000 as a charitable contribution.Upon later audit by the IRS,it is determined that the true value of the painting was $20,000.Assuming that Max is subject to a 35% marginal income tax rate,his penalty for overvaluation is:

• A)$0.
• B)$2,100.
• C)$4,200.
• D)$12,000.
• E)None of the above.

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