- quote -

I do it (but I'm not a tax pro).

- quote -

Pub. 525

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Benjamin Yazersky CPA <BYaz55DoNotHitReply[at]netscape.net> wrote:

- quote -

See the worksheet in the Form 1040 instructions associated
with Line 10.

--

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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BYaz55DoNotHitReply[at]netscape.net (Benjamin Yazersky CPA) writes:

- quote -

Is this any different from making a state estimated payment
on 1/15/2003 for federal tax purposes?

- quote -

I believe that you are supposed to apportion the refund
between the amount attributable to the 2002 estimated
payments (such portion becoming a recovery item) and the
amount attributable to the 2003 payments (such portion
serving to reduce the itemized deduction for state taxes in
2003). But nobody seems to do this, so I must be wrong.

- quote -

The pub that deals with recovery items (sorry, I forget the
number) addresses this in gory detail.

Dan Lanciani
ddl[at]danlan.*com

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"Benjamin Yazersky CPA" <BYaz55DoNotHitReply[at]netscape.net> wrote:

- quote -

Benjamin, I believe there is an old old 1950's era case on
tax benefit addressing this. It wasn't specific to state
tax payments but to split year payments and recovery in
general. The court in its (but most certainly not MY)
wisdom ruled that the taxable recovery should be based
relative to the total amount of payments made in each year.
For example, if you deducted $800 state tax in year one,
paid in January year two another $200, and received back as
a state tax refund $200, your taxable refund would be $160,
based on the proportion you deducted of the total amount
paid which contributed to the refund.

Since I consider myself to be somewhat brighter than most
people who wear robes all day long, I use a different and
simpler approach. Last in, first out. That is, if you
receive a taxable recovery, reduce it directly by the amount
paid in year two. Also reduce the deductible amount paid in
year two by the same amount. You might think you get the
same result but you don't because with this method you have
a lower AGI, which many times leads to a lower tax. Just my
2¢.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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taxpayer makes a payment of $100 to the state on 4/15/ 2003
with the state extension of the 2002 return

when the return is finalized the state return has a refund
of $200 state issues a 1099g for $200

how is the amount of the state tax refund that is included
in the 2003 return calculated?
(presume that the taxpayer clearly itemized without this
item and that there is no amt)

is there any code sec, reg or other form of guidance on this
issue?

--
<<< Benjamin Yazersky CPA [NJ & NY] > >
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