Question

- Assuming that Norma itemized deductions in 2019 (which totaled $27,700), how will the refund of 52,196 that she received in 2020 reated for Federal income tax purposes Norma will include s as income in 2020. c. Assume that Norma itemized deductions in 2019 (which totaled $20,000) and that she elects to have the $2,196 rend her 2020 state income tax liability. How will the 52,196 be treated for Federal income tax purposes? pled toward Norma will include as income in 2020. d. Assuming that Norma did not itemize deductions in 2019, how will the refund of $2,196 received in 2020 be treated for Federal income tax purposes? Norma win includes as income in 2020. Previous

Answer 1

Solution :-

(a) Total Amount of itemized deduction with respect to state income tax that can be claimed by Norma in federal return for the year

2018 is $9,100 and it has been calculated below;

Itemized deductions=State tax paid + Withholding for state tax + State tax paid = $4270 + $854 + $1220 = $6344

(b) Amount of $2196 received as a refund will be treated as income for the year 2019 since she can deduct it in previous year

(c) $2196 will be included in 2019 gross income to the extent the taxpayer derived a tax benefit From itemized deductions in 2018 , even she elects to have the refund applied towards her 2018 state income tax

(d) If Norma did not having any itemised deduction in 2018 then she is not required to report any refund of $2196 as income in 2019