Tom and Joan Moore, both CPAs, filed a joint 1994 federal income tax return showing $70,000 in taxable income.  During 1994, Tom’s daughter Laura, age 16, resided with Tom.  Laura had no income of her own and was Tom’s dependent.

Determine the amount of income or loss, if any that should be included on page one of the Moores’ 1994 Form 1040.
During 1994, the Moores received a $2,500 federal tax refund and a $1,250 state tax refund for 1993 overpayments.  In 1993, the Moores were not subject to the alternative minimum tax and were not entitled to any credit against income tax.  The Moores’ 1993 adjusted gross income was $80,000 and itemized deductions were $1,450 in excess of the standard deduction.  The state tax deduction for 1993 was $2,000.

The answer is $1,250. Why?