Identify the rule that determines whether a taxpayer must include in income a refund of an amount deducted in a previous year:
A)Tax refund rule
B)Constructive receipt
C)Return of capital principle
D)Tax benefit rule
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

The Tax benefit rule states that if a taxpayer received a tax benefit in a previous year from a deduction, and then receives a refund of that deduction, the refund must be included in income in the year received. This prevents taxpayers from double dipping and receiving a tax benefit for a deduction they did not actually pay for.

Identify the Rule That Determines Whether a Taxpayer Must Include