Question

briefly explain the tax benefit rule.

A. taxpayer who is recipient of a dispute amount must include the amount received in a gross income as long as the use of the funds is unrestricted.
B. a taxpayer who recovers an amount deducted in a previous year must report a gross income they received amount they received amount must be included in gross income even if the taxpayer receive no tax benefit from the previous deduction.
C. a taxpayer who receives an amount deducted in a previous year must report a gross income and covered amount recovered amount need not be included in the gross income if the taxpayer receives no tax benefit from the previous deduction there's a tax benefit only if the deduction reduces the taxes the previous year.
D. a family can reduce its taxes by shifting income from family members who are in a high tax bracket the family members who are too low tax bracket for example the children may own stock in the family business dividends on the stock or tax to the children.

Answer 1

Answer:-

Tax benefit rule:-

B. A taxpayer who recovers an amount deducted in a previous year must report a gross income they received Amount must be included in the gross income even if the tax payer receive no tax benefit from the previous deduction.

Explanation :- Tax benefit rule states that if the taxpayer recovers an expense or loss that was written off against the previous years income, the recovered Amount must be included in the current years gross income for computing Taxable Income.