Tax Benefit Rule: A Harsh IRS Interpretation

Authors

Michael F. Lynch, Bryant UniversityFollow

Document Type

Article

Comments

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

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Keywords

tax deductions;revenue rulings

Publisher

American Institute of Certified Public Accountants

Publication Source

Journal of Accountancy

Abstract

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.