How does the tax benefit rule apply in the following cases?
a. In 2013, the Orange Furniture Store, an accrual method taxpayer, sold furniture on credit for $1,000 to Sammy. The cost of the furniture was $600. In 2014, Orange took a bad debt deduction for the $1,000. In 2015, Sammy inherited some money and paid Orange the $1,000 he owed. Orange was in the 35% marginal tax bracket in 2013, the 15% marginal tax bracket in 2014, and the 35% marginal tax bracket in 2015.
b. In 2014, Marvin, a cash basis taxpayer, took a $2,000 itemized deduction for state income taxes paid. This increased his itemized deductions to a total that was $800 more than the standard deduction. In 2015, Marvin received a $1,600 refund when he filed his 2014 state income tax return. Marvin was in the 15% marginal tax bracket in 2014, but was in the 35% marginal tax bracket in 2015.
c. In 2014, Barb, a cash basis taxpayer, was in an accident and incurred $8,000 in medical expenses, which she claimed as an itemized deduction for medical expenses. Because of the 10%-of-AGI reduction, the expense reduced her taxable income by only $3,000. In 2015, Barb successfully sued the person who caused the physical injury and collected $8,000 to reimburse her for the cost of her medical expenses. Barb was in the 15% marginal tax bracket in both 2014 and 2015.
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