Reagan, who uses the cash method of accounting, lives in a state that imposes an income tax. In April 2015, she files her state income tax return for 2014 and pays an additional $1500 in state income taxes. During 2015, her withholdings for state income tax purposes amount to $8,500, and she pays estimated state income tax of $1,000. In April 2016, she files her state income tax return for 2015, claiming a refund of $2000. Reagan receives the refund in August 2016.

A. Assuming Reagan itemized deductions in 2015, how much may she claim as a deduction for state income taxes on her federal return for calendar year 2015 (filed April 2016)?

B. Assuming that Reagan itemized deductions in 2015, how will the refund of $2000 that she received in 2016 be treated for Federal income tax purposes?

C. Assume that Reagan itemized deductions for 2015 ad that she elects to have the $2000 refund applied toward her 2016 state income tax liability. How will the $2000be treated for Federal income tax purposes?

D. Assuming that Reagan did not itemize deductions for 2015, how will the refund of $2000 received in 2016 be treated for Federal income tax purposes?