A review of the 2019 tax file of Gregory,a single taxpayer who is age 40,provides the following information regarding Gregory's 2019 tax status: $$\begin{array} { | l | r | }
\hline \text { Adjusted gross income } & \$ 40,000 \
\hline \text { Medical expenses (before percentage limit) } & 5,000 \
\hline \text { Itemized deductions other than medical } & 12,000 \
\hline 2019 \text { potential standard deduction } & 12,200 \
\hline
\end{array}$$ In 2020,Gregory receives a reimbursement for last year's medical expenses of $1,200.As a result,Gregory must
A)include $800 in gross income for 2020.
B)include $1,200 in gross income for 2020.
C)reduce 2020's medical expenses by $1,200.
D)amend the 2019 return.

Question

A review of the 2019 tax file of Gregory,a single taxpayer who is age 40,provides the following information regarding Gregory's 2019 tax status: $$\begin{array} { | l | r | } 
\hline \text { Adjusted gross income } & \$ 40,000 \
\hline \text { Medical expenses (before percentage limit) } & 5,000 \
\hline \text { Itemized deductions other than medical } & 12,000 \
\hline 2019 \text { potential standard deduction } & 12,200 \
\hline
\end{array}$$ In 2020,Gregory receives a reimbursement for last year's medical expenses of $1,200.As a result,Gregory must
A)include $800 in gross income for 2020.
B)include $1,200 in gross income for 2020.
C)reduce 2020's medical expenses by $1,200.
D)amend the 2019 return.

Quizplus · Accepted Answer

Gregory originally deducted $5,000 in medical expenses, but only the amount exceeding 10% of his AGI ($4,000) was deductible. Thus, $1,000 was deducted. Receiving a $1,200 reimbursement means $800 of the previously deducted amount must be included in 2020's gross income.

A Review of the 2019 Tax File of Gregory,a Single