John A. Francisco - Page 29




                                       - 29 -                                         
          amount of tax imposed.  Sec. 111; Kadunc v. Commissioner, T.C.              
          Memo. 1997-92.                                                              
               Petitioner claimed an $8,708 income tax deduction relating             
          to payment of State taxes in 1994, and he received a $1,150 State           
          tax refund in 1995.  Petitioner contends that he received no tax            
          benefit in 1995 relating to the refund because his 1995 adjusted            
          gross income was negative.  We disagree; 1994 (i.e., the year of            
          the deduction) is the relevant year for determining whether he              
          received a tax benefit.  Kadunc v. Commissioner, supra.                     
          Petitioner does not contend that he did not receive a tax benefit           
          in 1994.  Accordingly, the amount of the 1995 refund is                     
          includable in his 1995 gross income.                                        
               Similarly, in 1995, petitioner claimed a $4,000 income tax             
          deduction relating to payment of State taxes, but paid no U.S.              
          income tax because, relying on section 931, he excluded all of              
          his wage income.  In 1996, he received a $3,839 refund.                     
          Petitioner contends he received no tax benefit because he had no            
          taxable income in 1995.  We disagree.  As a result of our holding           
          that he may not exclude his wage income, petitioner enjoyed a tax           
          benefit by his deduction of State income taxes for 1995.  Thus,             
          petitioner must include in his 1996 gross income the amount of              











Page:  Previous  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  34  35  36  37  38  Next

Last modified: May 25, 2011