Robert received a tax refund in 2014 from his state,which he deducted on his prior year's return as an itemized deduction.He must report the refund in income in 2014,subject to certain computations to determine the amount that is taxable.

Question

Quizplus · Accepted Answer

Tax refunds received in the previous year that were deducted as itemized deductions must be included in income in the current year. However, the amount that is taxable depends on whether the taxpayer received any tax benefit from the deduction in the prior year. This is calculated using the "tax benefit rule." Therefore, the statement in option A is correct.

Robert Received a Tax Refund in 2014 from His State,which