The IRS determined that Ernie Bledsoe underpaid his 2017 income tax by $11,200. Ernie's Form 1040 for that year reported an income tax liability of $31,800, so his correct 2017 income tax was $43,000 ($11,200 deficiency + $31,800 reported tax). Compute Ernie's penalty for a substantial understatement of income tax.

A. $0
B. $2,240
C. $1,240
D. $1,380


Answer: B

Business

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