Your friend Scotty informs you that he received a "taxfree" reimbursement in 2014 of some medical expenses he paid in 2013.Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?
A)Scotty itemized deductions in 2013.
B)Scotty did not itemize deductions in 2013.
C)Scotty itemized deductions in 2014.
D)Scotty did not itemize deductions in 2014.
E)Scotty itemized deductions in 2014 but not in 2013.

Question

Your friend Scotty informs you that he received a "tax­free" reimbursement in 2014 of some medical expenses he paid in 2013.Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?
A)Scotty itemized deductions in 2013.
B)Scotty did not itemize deductions in 2013.
C)Scotty itemized deductions in 2014.
D)Scotty did not itemize deductions in 2014.
E)Scotty itemized deductions in 2014 but not in 2013.

Quizplus · Accepted Answer

If Scotty did not itemize in 2013,he can exclude the reimbursement from gross income in 2014.If Scotty itemized deductions in 2013,he must report the reimbursement as gross income in 2014 to the extent he received a tax benefit from deducting medical expenses in 2013.Whether he itemized in 2014 will have no impact on the treatment of the reimbursement.

Your Friend Scotty Informs You That He Received a "Tax­free

Your Friend Scotty Informs You That He Received a "Taxfree