Kaitlin donated a painting to the local art museum. As she is subject to a 35% marginal tax rate, she needs a large charitable contribution deduction for the year. She engaged Vargas (who was referred to her by the staff of the museum) to provide an appraisal of the painting before she filed her Form 1040 for the year.

Kaitlin told Vargas, "Be kind to me on this appraisal, and I'll send several more clients to you in the future." Kaitlin paid Vargas a $45,000 fee for his services.

Vargas completed his appraisal and determined that the painting was worth $500,000 under current market conditions. Still, in light of Kaitlin's promise of future business, Vargas sent Kaitlin an official appraisal reporting a $900,000 value for the artwork. Vargas had never compromised his integrity, but this time the temptation was too much.

 Kaitlin used the appraisal to claim a $900,000 deduction for her charitable gift.

Kaitlin will incur a valuation penalty now that her Form 1040 has been audited and the IRS has determined that the correct amount of the deduction is $500,000. But is Vargas also exposed to a Federal tax penalty? Explain.