Jordan is a cash basis taxpayer. In 2014, she paid state income taxes of $5,000. In early 2015, she filed her 2014 state income tax return and received a $500 refund.
a. If Jordan itemized her deductions in 2014 on her Federal income tax return and her itemized deductions exceeded the standard deduction by at least $500, she must include the $500 in her 2015 Federal gross income.
b. If Jordan took the standard deduction on her 2014 Federal income tax return, Jordan must include the $500 in her 2015 Federal gross income.
c. If Jordan itemized her deductions in 2014, she must amend her 2014 Federal income tax return to reduce her itemized deductions.
d. If Jordan took the standard deduction on her 2014 Federal income tax return, Jordan must amend her 2014 tax return.
e. None of these choices are correct.
Answer: a. If Jordan itemized her deductions in 2014 on her Federal income tax return and her itemized deductions exceeded the standard deduction by at least $500, she must include the $500 in her 2015 Federal gross income.