Morris Is a Single Individual Who Has Total Itemized Deductions

question 147

Multiple Choice

Morris is a single individual who has total itemized deductions in 2016 of $6,500.His itemized deductions include $2,000 for state income taxes.After filing his 2016 state income tax return he receives a refund of $275.

• A)Morris must include $275 as income on his 2016 federal income tax return.
• B)Morris must amend his 2016 federal tax return to reflect state income taxes of $1,725 ($2,000 - $275).
• C)If Morris itemizes his tax return in 2017 he must reduce his state tax deduction by $275.
• D)Morris must include $200 as income on his 2017 federal income tax return.
• E)Morris does not have to report any of the state income tax refund on his 2017 tax return.

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Definitions:

Premium

The amount by which the price of something, especially a financial asset, exceeds its nominal or face value.

Strike Price

The fixed price at which the holder of an option can buy (in the case of a call) or sell (in the case of a put) the underlying security or commodity.

Stock Price

The cost of purchasing a share of a company's stock, representing ownership in the company and a claim on part of its assets and profits.

Maximum Loss

The greatest amount of loss an investor or trader is potentially exposed to in an investment or trade.