1) Cambra, Inc., is a calendar year S corporation. Cambra's Form 1120S shows nonseparately stated ordinary income of $80,000 for the year. Andy owns 40% of the Cambra stock throughout the year. The following information is obtained from the corporate records.
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Tax-exempt interest income
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$3,000
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Salary paid to Andy
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(52,000)
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Charitable contributions
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(6,000)
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Dividends received from a foreign corporation
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5,000
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Short-term capital loss
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(6,000)
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Depreciation recapture income
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11,000
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Refund of prior state income taxes
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5,000
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Cost of goods sold
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(72,000)
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Long-term capital loss
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(7,000)
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Administrative expenses
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(18,000)
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Long-term capital gain
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14,000
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Selling expenses
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(11,000)
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Andy's beginning stock basis
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32,000
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Andy's additional stock purchases
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9,000
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Beginning AAA
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31,000
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Andy's loan to corporation
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20,000
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Compute Cambra's book income or loss.
Compute Andy's ending stock basis.
Calculate Cambra's ending AAA balance.
- Compute the failure to pay and failure to file penalties for Robert, who filed his 2012 income tax return on December 20, 2013, paying the $10,000 amount due at that time. On April 1, 2013, Robert received a six-month extension of time in which to file his return. He has no reasonable cause for failing to file his return by October 15 or for failing to pay the tax that was due on April 15, 2013. Robert's failure to comply with the tax laws was not fraudulent.
- 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.
Compute the penalty the IRS can assess against Leland. (Do not consider the valuation penalty as to Glenda's return.)
What is the penalty if Leland's appraisal fee was $7,500 (not $20,000)?