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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
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