Yard Corporation, a cash basis taxpayer, received $10,000 from a customer in 2016. In 2016, the customer filed a claim for a refund of the fee. In 2017, Yard refunded the customer $6,000. In 2016, Yard paid $5,000 in estimated state income tax. In May 2017, Yard received a state income tax refund of $2,000 for overpayment of its 2016 income tax. Yard was in the 35% marginal tax bracket in 2016 and in the 15% marginal tax bracket in 2017. What are the tax effects of the 2017 payment to the customer and the collection of the state income taxes overpaid?

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The Answer of Yard Corporation, a cash basis taxpayer, received $10,000 from a customer in 2016. In 2016, the customer filed a claim for a refund of the fee. In 2017, Yard refunded the customer $6,000. In 2016, Yard paid $5,000 in estimated state income tax. In May 2017, Yard received a state income tax refund of $2,000 for overpayment of its 2016 income tax. Yard was in the 35% marginal tax bracket in 2016 and in the 15% marginal tax bracket in 2017. What are the tax effects of the 2017 payment to the customer and the collection of the state income taxes overpaid?

Yard Corporation, a Cash Basis Taxpayer, Received $10,000 from a Customer