The taxpayer incorrectly took a $5,000 deduction (e.g.,incorrectly calculated depreciation)in 2013 and as a result his taxable income was reduced by $5,000.The taxpayer discovered his error in 2014.The taxpayer must add $5,000 to his 2014 gross income in accordance with the tax benefit rule to correct for the 2013 error.

Question

Quizplus · Accepted Answer

The tax benefit rule requires income inclusion only if a deduction taken in a prior year is later recovered. An incorrect deduction does not require income inclusion in a subsequent year; instead, the taxpayer should amend the prior year's return.

The Taxpayer Incorrectly Took a $5,000 Deduction (E