es to shop and has found it very difficult to repay her loans and credit card se
ID: 2548589 • Letter: E
Question
es to shop and has found it very difficult to repay her loans and credit card se of these difficulties, the bank decided to forgive one of her most recent 13. Mercedes lik After the loan was discharged, Mercedes had total assets of loans, an $200,000 and her remaining loan her gross income? amount of $ 30,000. s total $175,000. What amount must Mercedes include in a. $15,000 b. $30,000 c. $25,000 d. $28,000 e. Zero - Mercedes was not solvent when the loan was discharged 14. Victor deducted $3,000 of state income taxes on h received a state income tax refund of $595. What amount of the refund, if any, sh include in his gross income if last year his total itemized deduc is tax return last year. This year he ould Victor tions exceeded the standard deduction by $300? a. $2,705 b. $300 c. $5 d. $595 e. None of these - refunds of state incorne taxes are not included in gross incomeExplanation / Answer
13 -e- zero
In generalGross income does not include any amount which (but for this subsection) would be includible in gross income by reason of the discharge (in whole or in part) of indebtedness of the taxpayerif—
(A) the discharge occurs in a title 11 case,
(B) the discharge occurs when the taxpayer is insolvent,
(C) the indebtedness discharged is qualified farm indebtedness,
(D) in the case of a taxpayer other than a C corporation, the indebtedness discharged is qualified real property business indebtedness, or
(E)the indebtedness discharged is qualified principal residence indebtedness which is discharged—
(i)before January 1, 2018, or
(ii) subject to an arrangement that is entered into and evidenced in writing before January 1, 2018.
As per (B)- if the discharge occurs when the taxpayer is insolvent, the dischared debt is not included in gross income.
14. b-$300.
State income tax refunds may be taxable, depending on what you deducted on your prior-year tax returns.
If you claim only standard deduction in prior year return, then any refund of state income tax is not taxable.
How much you deducted last year beyond the will become taxable if it is refunded in this year.
if your itemized deductions exceed your standard deduction by $300 and you got a $595 state tax refund, you would owe tax on only $300 of your refund. If you get a refund of only $200 then entire $200 will be taxable. But you got a refund of amount more than what you deducted last year, so only the extend of amount you deducted prior year is taxable. That is $300.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.