The best I can come up with, using GAAP/tax differences as a reference point, is that a deferral item is something like installment sales, payments collected in advance, depreciation, or % of completion contracts, all of which are treated differently for GAAP and tax, but will reverse over time and equal each other. Recognition is simply “deferred.”
Exclusion items are recognized for either GAAP/tax and not recognized for the other. Examples of these would be municipal bond interest income (completely excluded for tax purposes, but always included for GAAP), federal income tax (always included in GI for tax, expensed for GAAP), etc. As for “exemption” items, that sounds kind of like a distractor. There is an exemption for AMT, with phase outs for different filing statuses. The best answer for the state refund deduction is that it is excluded; we don't get to take that reduction in AMT – it is added back.
Sounds counterintuitive because added back and excluded have opposite meanings. For regular tax, we get to deduct state tax refunds as an itemized deduction; for AMT, they are an add back (The T in Becker's PANIC TIMME pneumonic). Since we “add” them back for AMT, they can be thought of as an “exclusion” item in terms of regular tax…we no longer get to exclude them from regular tax.
If this makes no sense, ignore it…AMT is so weird. I am hoping the questions are simple like they have been in Becker.
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