Brad, who uses the cash method of accounting, lives in a state that imposes an income tax (including withholding from wages).On April 14, 2012, he files his state return for 2011, paying an additional $600 in state income taxes.During 2012, his withholdings for state income tax purposes amount to $3,550.On April 13, 2013, he files his state return for 2012 claiming a refund of $800.Brad receives the refund on June 3, 2013.If he itemizes deductions, how much may Brad claim as a deduction for state income taxes on his Federal income tax return for calendar year 2012 (filed in April 2013)?
A)$3,350.
B)$3,550.
C)$4,150.
D)$5,150.
E)None of the above.

Question

Quizplus · Accepted Answer

Brad can deduct the state income taxes paid in 2012, which include the $600 paid in April 2012 for 2011 taxes and the $3,550 withheld in 2012, totaling $4,150. The refund received in 2013 does not affect the 2012 deduction.

Brad, Who Uses the Cash Method of Accounting, Lives in a State