LaCharles Made a Charitable Contribution of Property That He Valued

question 38

Essay

LaCharles made a charitable contribution of property that he valued at $90,000.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 30% Federal income tax bracket.Determine LaCharles's amount due for both tax and any penalty.

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Definitions:

Operating Leverage

A measure of how sensitive a company's operating income is to a change in its sales volumes, reflecting the proportion of fixed costs in a company's cost structure.

Financial Break-Even

The point at which total revenues equal total costs and expenses, resulting in neither profit nor loss.

Salvage Value

The estimated residual value of an asset at the end of its useful life.

Cash Break-Even

The point at which a business's cash inflows equal its cash outflows, excluding financing or investment income.