Problem 10-32 (Algorithmic) (LO. 4)

Norma, who is single and uses the cash method of accounting, lives in a state that imposes an income tax. In April 2017, she files her state income tax return for 2016 and pays an additional $2,740 in state income taxes. During 2017, her withholdings for state income tax purposes amount to $9,590, and she pays estimated state income tax of $1,918. In April 2018, she files her state income tax return for 2017, claiming a refund of $4,932. Norma receives the refund in August 2018.

If an amount is zero, enter "0".

a. Assuming that Norma itemized deductions in 2017, how much may she claim as a deduction for state income taxes on her Federal return for calendar year 2017 (filed April 2018)? $

b. Assuming that Norma itemized deductions in 2017 (which totaled $27,700), how will the refund of $4,932 that she received in 2018 be treated for Federal income tax purposes?

Norma will include $ as income in 2018.

c. Assume that Norma itemized deductions in 2017 (which totaled $20,000) and that she elects to have the $4,932 refund applied toward her 2018 state income tax liability. How will the $4,932 be treated for Federal income tax purposes?

Norma will include $ as income in 2018.