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his 1991 return. Generally, under section 111 and the
regulations thereunder, if a tax was deducted on a prior year's
return that resulted in a reduction of tax and a tax benefit to
the taxpayer, a subsequent recovery by the taxpayer of such tax
must be included in gross income in the year the recovery is
received. Prewitt v. Commissioner, T.C. Memo. 1995-24; Kadunc v.
Commissioner, T.C. Memo. 1992-61, affd. without published opinion
981 F.2d 1251 (4th Cir. 1992); Kass v. Commissioner, T.C. Memo.
1988-403; Tracy v. Commissioner, T.C. Memo. 1985-40, affd.
without published opinion 782 F.2d 1045 (7th Cir. 1985); Nyhus v.
Commissioner, T.C. Memo. 1979-519; Monroe v. Commissioner, T.C.
Memo. 1979-100. Petitioner presented no evidence to show that he
had not realized a tax benefit from his deduction of State income
taxes on his 1990 return. On the contrary, the copy of
petitioner's 1990 return reflects that petitioner unquestionably
enjoyed a tax benefit by his deduction of State income taxes for
1990. On this record, the Court sustains respondent on this
issue.
With respect to the $1,296 disallowed home mortgage interest
expenses, respondent received from Gulf States a "substitute"
Form 1098, "Annual Tax and Interest Statement" (Form 1098),
reflecting "net" interest paid by petitioner to Gulf States
during 1991 that totaled $15,600.83. Although the Form 1098
showed total interest "applied" to 1991 as $16,896.33, the form
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