During 2015 Chad received a check for $775 from the state of North Carolina. Thi

Question

During 2015 Chad received a check for $775 from the state of North Carolina. This was a refund of some of the state income taxes that were withheld from Chad's paychecks during 2014.

Chad had itemized deductions on his 2014 Federal income tax return, including deducting $2,575 of state income taxes paid.

Chad must report the $775 state income tax refund he received as taxable income on his 2015 Federal tax return.

True

False

Chad won a car valued at $25,000 when he appeared on "The Price is Right" game show. He didn't need the car (nor did he especially like the car) so three weeks later he donated it to the local Red Cross chapter.

Nonetheless, Chad is required to report the value of the car as taxable income when filing his Federal return.

True

False

Chad received a tuition-only scholarship from his local community college worth $5,000. He must pay income tax on the $5,000 he received.

True

False

Explanation / Answer

1. The answer is “true”.

This is because State income tax refund must be included in your federal income for the year in which your check was received if you deducted the State income tax paid as an itemized deduction on your federal income tax return.

2. The answer is “true”.

Merchandise that are won from game shows have to be included as part of taxable income. In fact the car will be valued at manufacturer’s suggested retail price (MSRP). Chad can then take a deduction for his donation.

3. The answer is “false”.

Chad can exclude the $5,000 tuition-only scholarship that he received from tuition-only scholarship from his gross income.

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