Tim has state income taxes of $4,500 withheld from his salary during 2010. On his 2010 federal income tax return, Tim properly deducts the $4,500 as state taxes paid. Upon filing his 2010 state income tax return, he determines that his actual state income tax for 2010 is only $3,900, and the state sends him a $600 refund. What are the tax consequences of the refund? Explain in terms of the concepts presented in the chapter. How would your answer change if Tim's actual state income tax is $4,900 and he has to pay $400 with his state return?