In December 2017, Todd, a Cash Basis Taxpayer, Paid $1,200

question 21

Multiple Choice

In December 2017, Todd, a cash basis taxpayer, paid $1,200 of fire insurance premiums for the calendar year 2018 on a building he held for rental income. Todd deducted the $1,200 of insurance premiums on his 2017 tax return. He had $150,000 of taxable income that year. On June 30, 2018, he sold the building and, as a result, received a $500 refund on his fire insurance premiums. As a result of the above:

• A)Todd should amend his 2017 return and claim $500 less insurance expense.
• B)Todd should include the $500 in 2018 gross income in accordance with the tax benefit rule.
• C)Todd should add the $500 to his sales proceeds from the building.
• D)Todd should include the $500 in 2018 gross income in accordance with the claim of right doctrine.
• E)None of these.

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