L. A. and Paula file as married taxpayers. In August of this year, they received a $6,740 refund of state income taxes that they paid last year.

How much of the refund, if any, must L. A. and Paula include in gross income under the following independent scenarios? Assume the standard deduction last year was $24,000.

a. Last year L. A. and Paula had itemized deductions of $128,400, and they chose to claim the standard deduction.

Refund to be included