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Issue (6): State Income Tax Refunds
Petitioner received refunds of State income taxes in the
amount of $224 in 1993 and in the amount of $414 in 1994, neither
of which was reported in income.
Generally, pursuant to section 111 and the regulations
thereunder, if State income tax was deducted on a Federal income
tax return for a prior taxable year and if such deduction
resulted in a tax benefit to the taxpayer (i.e., a reduction of
Federal income tax) for such prior taxable year, then a
subsequent recovery by the taxpayer (i.e., a refund) of such
State income tax must be included in the taxpayer's gross income
for Federal tax purposes in the year in which the recovery is
received. Kadunc v. Commissioner, T.C. Memo. 1997-92, and cases
cited therein.
Petitioner presented no evidence to show that he did not
realize a tax benefit from the deduction of State income tax on
his Federal income tax return for 1992. Accordingly, we sustain
respondent's determination that the refund of State income tax in
the amount of $224 in 1993 is includable in petitioner's gross
income for that year.
In contrast, the record demonstrates that petitioner will
not receive a tax benefit from the deduction of State income tax
on his Federal income tax return for 1993 because the standard
deduction to which he is entitled for 1993 exceeds the amount of
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