Calvin miscalculated his income in 2012 and overpaid his state income tax by $10,000.In 2014,he amended his 2012 state income tax return and received a $10,000 refund and $900 interest.Calvin itemized his deductions in 2012,deducting $12,000 in state income tax and $30,000 total itemized deductions.As a result of the amended return in 2014,Calvin must recognize $10,900 of gross income.

Question

Quizplus · Accepted Answer

The $10,000 is included in gross income under the tax benefit rule.Interest on a state tax refund does not qualify for the state and local interest exclusion.

Calvin Miscalculated His Income in 2012 and Overpaid His State