Question

Irene is a resident of a state that imposes an income tax. Information regarding Irene's state...

Irene is a resident of a state that imposes an income tax. Information regarding Irene's state income tax transactions is as follows:

Taxes withheld this year                                                    $5,400

Refund received this year from overpayment

of last year's tax liability                                                     1,200

Deficiency assessed for two years ago

(as a result of audit by the state)                                       2,000

Interest on the deficiency                                                       300

Both the two-year-old deficiency and interest thereon were paid by Irene this year. If Irene elects to itemize her deductions this year, how much of the above transactions can be claimed?

a.

$7,700
b.

$7,430
c.

$7,400
d.

$6,230
e.

None of the above.
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Answer #1

Deductible state income taxes are:

Taxes withheld this year                                                    $5,400

Deficiency assessed for two years ago

(as a result of audit by the state)                                       2,000

Total allowable itemized decudtions is 7,400

Thus, correct option is - 7,400

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