Tax Benefit Rule: A Harsh IRS Interpretation

Document Type



Published by the American Institute of Certified Public Accountants in Journal of Accountancy, volume 177, Issue 2, Page 30.

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Publication Source

Journal of Accountancy


Taxpayers often deduct an amount in one year and recover it in a subsequent year (for example, state income tax refunds, bad debt recoveries and medical expense and casualty loss reimbursements). Generally, the amount recovered must be included in gross income in the year it's received. However, tax code section 111 says the amount received is excluded from income if the taxpayer did not get a tax benefit from the prior year's deduction.