The taxpayer incorrectly took a $5,000 deduction (e.g. ,incorrectly calculated depreciation)in 2014 and as a result his taxable income was reduced by $5,000.The taxpayer discovered his error in2015.The taxpayer must add $5,000 to his 2015 gross income in accordance with the tax benefit rule to correct for the 2014 error.

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The tax benefit rule applies when the taxpayer claims a deduction in one year,but in a later year receives an adjustment (e.g. ,a refund)to the amount of the expense.

The Taxpayer Incorrectly Took a $5,000 Deduction (E