Phyllis,a calendar year cash basis taxpayer who itemized deductions totaling $20,000,overpaid her 2014 state income tax and is entitled to a refund of $400 in 2015.Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2015.She is required to recognize that amount as income in 2015.

Question

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The overpayment of state income tax is considered a refund of a prior year's deduction, which must be included in income in the year of receipt.

Phyllis,a Calendar Year Cash Basis Taxpayer Who Itemized Deductions Totaling