For 2009,Godfrey had $5,000 in itemized deductions for state income taxes paid.In 2011,Godfrey's 2009 state income tax return was audited and he was required to pay an additional $4,000 of state income taxes.Godfrey was in the 35% tax bracket in 2009,but his marginal tax bracket in 2011 is 15%.He will itemize his deductions on his 2011 return.
A)The $4,000 payment in 2011 is not deductible.
B)Godfrey must amend his 2009 return.
C)The $4,000 payment in 2011 will reduce his 2011 Federal income tax by $600 ($4,000 * 15%).
D)Godfrey can reduce his 2011 Federal income tax by $1,400 ($4,000 * 35%).
E)None of the above.

Question

Quizplus · Accepted Answer

The $4,000 payment in 2011 is not deductible because it was paid in 2011 and not in the year of the original deduction (2009). Godfrey does not need to amend his 2009 return because the deduction was valid at the time. However, the $4,000 payment in 2011 can still reduce his 2011 Federal income tax by $600 (15% of $4,000) since he is in a lower tax bracket in 2011.

For 2009,Godfrey Had $5,000 in Itemized Deductions for State Income