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Tom and Joan Moore, both CPAs fi led a joint 2013 federal income tax return showing $70,000 in taxable income. During
2013, Tom’s daughter Laura, age 16, resided with Tom’s former spouse. Laura had no income of her own and was not Tom’s dependent. For items 1 through 10, determine the amount of income or loss, if any, that should be included on page one of the Moore’s 2013 Form 1040.
5. During 2013, the Moores received a $2,500 federal tax refund and a $1,250 state tax refund for 2012 overpayments. In
2012, the Moores were not subject to the alternative minimum tax and were not entitled to any credit against income tax.
The Moores’ 2012 adjusted gross income was $80,000 and itemized deductions were $1,450 in excess of the standard
deduction. The state tax deduction for 2012 was $2,000.
Answer: 5. ($1,250) Since the Moores’ itemized deductions exceeded their available standard deduction by $1,450, all $1,250 of the state income tax refund must be included in gross income for 2013 because its deduction in 2012 reduced the Moores’ federal income tax.
If the itemized deductions were 1450 in excess of the standard deduction, why not include the whole 1450 instead of just 1250 of the state income tax refund?
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