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Taxation: Refund status from California for IOU; reportable?

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According to our reading, "if a taxpayer receives a refund of state income taxes deducted in a prior year, the taxpayer must include the refund as income in the year of the refund to the extent the taxpayer received a tax benefit from the prior deduction."

What about California's situation where taxpayers are getting IOU's from the state rather than actual cash from the state?

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Solution Summary

In two paragraphs, the solution explains the basic concept involved in determining when the California IOUs are reportable as income.

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Very interesting question and not one that tax people have had to deal with in the past. The truth is that individual taxpayers report on a cash basis and therefore the unreceived refund is not a reportable ...

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