The corporation Littlest Things, Inc., (LTI), made a charitable donation of a piano once owned by Elton John, and claimed a charitable deduction on its taxes, of the value of the piano. The allowance of the deduction was not questioned by the IRS in an audit, for the full fair market value of the piano, since LTI donated it to a museum covering English musicians, and the museum exhibited the piano. The appraiser hired by LTI, testified on LTI's behalf at trial in tax court to add substantiation to the valuation, as LTI deducted $ 70,000 as a charitable donation on its form 1120. The tax court judge decided that the proper valuation for the piano was $ 40,000. Since LTI has a marginal tax rate of 34%, does LTI owe a penalty specifically for the now known to be improper valuation deduction amount? If so, how much?
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