How does the tax benefit rule apply in the following cases? a. In 2018, the Orange Furniture Store, an accrual method taxpayer, sold furniture on credit for $1,000 to Sammy. Orange's cost of the furniture was $600. In 2019, Orange took a bad debt deduction for the $1,000 because Sammy would not pay his bill. In 2020, Sammy inherited some money and paid Orange the $1,000 he owed. Orange owner was in the 35% marginal tax bracket in 2018, the 12% marginal tax bracket in 2019, and the 35% marginal tax bracket in 2020.

Orange Furniture must include $in gross income as the recovery of a prior deduction. The timing of the income and deductions cost Orange $

b. In 2018, 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 2018, Marvin received a $1,600 refund when he filed his 2018 state income tax return. Marvin was in the 12% marginal tax bracket in 2018, but was In the 35% marginal tax bracket in 2019. How much must Marvin include in his gross income for 2019?

c. In 2018, 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 7 .S%-of-AGI reduction, the expense reduced her taxable income by only $3,000. In 2019, 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 22% marginal tax bracket in 2018 12% in 2019. What amount, if any, will Barb include in her 2019 gross income?