How does the tax benefit rule apply in the following cases? a. In 2017, the Orange Furniture Store, an accrual method sole proprietorship, sold furniture on credit for $1,000 to Sammy. The cost of the furniture was $600. In 2018, Orange took a bad debt deduction for the $1,000. In 2019, Sammy inherited some money and paid Orange the $1,000 he owed. Orange's owner was in the 35% marginal tax bracket in 2017, the 12% marginal tax bracket in 2018, and the 35% marginal tax bracket in 2019. Orange Furniture must include $ 1,600 X in gross income as the recovery of a prior deduction. The timing of the income and deductions cost Orange $ 2,000 X. Feedback Check My Work The tax benefit rule applies when the taxpayer takes a deduction in one year but recovers the deduction in a subsequ need to determine the extent to which receipts can be excluded under the tax benefit rule. b. In 2018, Marvin, a cash basis taxpayer, took a $2,000 itemized deduction for state income taxes paid. This increased his itemized deductions to a total that was $800 more than the standard deduction. In 2018, Marvin received a $1,600 refund when he filed his 2018 state income tax return. Marvin was in the 12% marginal tax bracket in 2018, but was in the 35% marginal tax bracket in 2019. How much must Marvin include in his gross income for 20197 Feedback Check My Work Incorrect c. In 2018, Barb, a cash basis taxpayer, was in an accident and incurred $8,000 in medical expenses, which she claimed as an itemized deduction for medical expenses. Because of the 7.5%-of-AGI reduction, the expense reduced her taxable income by only $3,000. In 2019, Barb successfully sued the person who caused the physical injury and collected $8,000 to reimburse her for the cost of her medical expenses. Barb was in the 22% marginal tax bracket in 2018 12% in 2019. What amount, if any, will Barb include in her 2019 gross income? How does the tax benefit rule apply in the following cases? a. In 2017, the Orange Furniture Store, an accrual method sole proprietorship, sold furniture on credit for $1,000 to Sammy. The cost of the furniture was $600. In 2018, Orange took a bad debt deduction for the $1,000. In 2019, Sammy inherited some money and paid Orange the $1,000 he owed. Orange's owner was in the 35% marginal tax bracket in 2017, the 12% marginal tax bracket in 2018, and the 35% marginal tax bracket in 2019. Orange Furniture must include $ 1,600 X in gross income as the recovery of a prior deduction. The timing of the income and deductions cost Orange $ 2,000 X. Feedback Check My Work The tax benefit rule applies when the taxpayer takes a deduction in one year but recovers the deduction in a subsequ need to determine the extent to which receipts can be excluded under the tax benefit rule. b. In 2018, Marvin, a cash basis taxpayer, took a $2,000 itemized deduction for state income taxes paid. This increased his itemized deductions to a total that was $800 more than the standard deduction. In 2018, Marvin received a $1,600 refund when he filed his 2018 state income tax return. Marvin was in the 12% marginal tax bracket in 2018, but was in the 35% marginal tax bracket in 2019. How much must Marvin include in his gross income for 20197 Feedback Check My Work Incorrect c. In 2018, Barb, a cash basis taxpayer, was in an accident and incurred $8,000 in medical expenses, which she claimed as an itemized deduction for medical expenses. Because of the 7.5%-of-AGI reduction, the expense reduced her taxable income by only $3,000. In 2019, Barb successfully sued the person who caused the physical injury and collected $8,000 to reimburse her for the cost of her medical expenses. Barb was in the 22% marginal tax bracket in 2018 12% in 2019. What amount, if any, will Barb include in her 2019 gross income