[waitspring]

Below is the example in Wiley to explain the tax benefit rule:

TP deducted a $200 business expense last year, but because of limitations the deduction only reduced his taxable income by $120. This year a client reimbursed $150 of the original expense. TP must include $120 of the reimbursement in his income this year.

My question is,will this $150 Reimbursement in the current year be taxable or nontaxable? I think the $150 should not be taxed in the current year. And the non-taxable reimbursement amount can be not greater then $200. Of cause we will add the $120 (last year deduction amount) in the current year income.

Please let me know if i am not correct.

Thanks a lot for your help!!