If a taxpayer has to repay an amount they reported as income in an earlier year (because at the time, they thought they had an unrestricted right to it), they may be able to claim a deduction or a credit under the "claim of right" rules. Choose the response that correctly completes the next sentence describing a taxpayer's eligibility for a deduction or credit under these rules. The taxpayer:

1. May only deduct the repayment as an other itemized deduction on Schedule A (Form 1040), line 16, if the amount they previously included in income is less than $3,000.
2. May be able to claim either the deduction or the credit if the amount they repaid is less than $3,000.
3. May be able to claim the deduction or credit if the amount they repaid is more than $3,000.
4. Must always include the amount they repaid in their income in the year in which they repaid it.