Compute the penalty the IRS can assess against Leland

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Question - Leland, a qualified appraiser of fine art and other collectibles, was advising Glenda when she was determining the amount of the charitable contribution deduction for a gift of sculpture to a museum. Leland sanctioned a $900,000 appraisal, even though he knew the market value of the piece was only $300,000. Glenda assured Leland that she had never been audited by the IRS and that the risk of the government questioning his appraisal was negligible.

But Glenda was wrong, and her return was audited. The IRS used its own appraisers to set the value of the sculpture at $400,000. Glenda is in the 33% Federal income tax bracket, while Leland's fee for preparing the appraisal was $20,000.

Required -

a. Compute the penalty the IRS can assess against Leland. (Do not consider the valuation penalty as to Glenda's return.)

b. What is the penalty if Leland's appraisal fee was $7,500 (not $20,000)?

Reference no: EM132497159

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