Rodrigo has $5,000 of state income taxes withheld from his salary during 2013. On his 2013 income tax return, Rodrigo properly deducts the $5,000 as state taxes paid. Upon filing his 2013 state tax return on April 15, 2014, he determines that his actual State income tax for 2013 is only $4,100. He receives a $900 refund on May 25, 2014 from the amounts withheld by the state. What concepts), constructs), or doctrines) dictate that the $900 is included in Rodrigo's 2014 income? I. Annual Accounting Period Concept. II. Tax Benefit Rule.

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The Tax Benefit Rule requires that the $900 refund be included in Rodrigo's 2014 income because he had previously deducted the $5,000 state income taxes on his 2013 return. The Annual Accounting Period Concept requires that income and expenses be recognized in the year in which they are earned or incurred, regardless of when the cash is received or paid.

Rodrigo Has $5,000 of State Income Taxes Withheld from His