In December 2019, Todd, a Cash Basis Taxpayer, Paid $1,200

question 92

Multiple Choice

In December 2019, Todd, a cash basis taxpayer, paid $1,200 of fire insurance premiums for the calendar year 2020 on a building he held for rental income.Todd deducted the $1,200 of insurance premiums on his 2019 tax return.He had $150,000 of taxable income that year.On June 30, 2020, 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 2019 return and claim $500 less insurance expense.
• B)Todd should include the $500 in 2020 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 2020 gross income in accordance with the claim of right doctrine.
• E)None of these.

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Definitions:

Authority Figure

An individual who holds power or influence, often in a leadership role, within a specific context.

Sanction

A sanction can refer to a penalty imposed for breaking a law, rule, or agreement, or it can denote official permission or approval for an action.

Complementary Patterns

Interaction patterns in relationships where the behaviors of one individual are aligned with and support the behaviors of another, creating a balanced dynamic.

Conflict Interaction

The dynamic process where individuals engage in an exchange regarding their opposing interests or views.