Jack, a cash-basis single taxpayer, reported $50,000 of adjusted gross income last year and claimed itemized deductions of $15,000, consisting of $10,000 of state income taxes and $5,000 of investment interest, paid last year. Jack's itemized deduction amount, which exceeded the standard deduction available to single taxpayers for last year by $1,150, was fully deductible, and it was not subject to any limitations or phase-outs. In the current year, Jack received a $1,500 state tax refund relating to the prior year. What is the proper treatment of the state tax refund? Include $1,150 in income in the current year. Include $1,500 in income in the current year. Amend the prior year's return and reduce the claimed itemized deductions for that year. Include none of the refund in income in the current year