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Never hurts to be reminded of the basics and to reinforce our knowledge, even if the information is a projected adjustment to the existing penalties. It's often the simple mistakes that blindside us.

Other tax preparers have highly recommended GQueues to me. I haven't had a chance to check it out yet.

I am going to assume he may be referring to the purchase of a tax credit from someone who entered into a conservation easement. Often these are awarded to land rich/cash poor taxpayers (i.e, farmers) and who because of no real taxable income, the tax credit is pretty much wasted. So some states allow them to be sold to actually generate an incentive for the TP to put the land into conservation/non-development use. In this case, the OP uses the term "donation." If someone pays $100K for something and it has a FMV of $445K, then then there is going to be gain reportable somewhere when it is realized.

COPIED FROM CPA PRACTICE ADVISOR: Tax return preparers also are subject to a number of penalties that are adjusted for inflation. These 2017 projected penalty amounts are shown below. Projected amounts for other penalties are included in the full report. Scenario Penalty Per Violation Maximum Penalty Failure to Furnish Copy to Taxpayer $50 $25,500 Failure to Sign Return $50 $25,500 Failure to Furnish Identifying Number $50 $25,500 Failure to Retain Copy or List $50 $25,500 Failure to File Correct Information Returns $50 $25,500 Negotiation of Check $510 No limit

Adding to my post above, I'd probably deduct it. I don't think the character of the loan or its terms are changed simply because it was inherited. It is still a reverse mortgage, and if it is still in the estate the administrator or executor would handle it the same way the decedent would if still living, and in the heir's hands he is still bound by its terms and is required to pay it off within a certain time frame. From pub 936: Reverse mortgages. A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. With a reverse mortgage, you retain title to your home. Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Part II.