Robbe, a cash basis single taxpayer, reported $50,000 of adjusted gross income last year and claimed itemized deductions of $5,500, consisting solely of $5,500 of state income taxes paid last year.  Robbe's itemized deduction amount, which exceeded the standard deduction available to single taxpayers for last year by $1,150, was fully deductible and it was not subject to any limitations or phase- outs.  In the current year, Robbe received a $1,500 state tax refund relating to the prior year.  What is the proper treatment of the state tax refund?

a.Include none of the refund in income in the current year.         

b.Include $1,150 in income in the current year.        

c. Include $1,500 in income in the current year. 
d. Amend the prior-year's return and reduce the claimed itemized deductions for that year.

The asnwer is B. Why? I thought the state tax refund is taxable if it did a itemized deduction last year. So why not C? Please help me explain this question..........Thx a lot

Hi CPA#1

Thank you for your reply, you don't confused me ^^. I am just confused with the question. I thought that we either choose to itemized the deduction or use standard deduction. We don't do both at the same time right? because the following sentence makes me to assuem that he did both itemized deduction and standard deduction.  

"Robbe's itemized deduction amount, which exceeded the standard deduction available to single taxpayers for last year by $1,150"  

Thanks~ CPA #1 I got it~