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1. Last year, taxpayer had a $10,000 nonbusiness bad debt. Taxpayer also had an $8,000 capital gain and taxable income of $35,000. If taxpayer collects the entire $10,000 during the current year, what amount needs to be included in gross income in the current year?
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Answer #1

The taxpayer have to include the $10,000 in gross income to the extent tax benefit received in last year. The amount $10,000 deduction provided a tax benefit; $8,000 offset by the capital gain and $2,000 offset against ordinary income.

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