Scorp refund

[taxme]

Scorp received refund for state tax filed in 2004. Recd. in 2005.

How should I report? Is it just offset against receivable of 2004 return? taxable in 2005?

Thanks

[OldJack]

depends

If the S-corp has a receivable on the books in 2004 then it would not be taxable in 2005 as the tax effect would have been recognized in 2004. It just reduces the receivable.

If no receivable in 2004 that means it may have been deducted as state tax in the federal 2004 and would therefore be taxable income in 2005.

If the method of accounting for the S-corp did not deduct it in 2004 rather paid the 2004 tax in 2005, then it would be an offset of the state tax expense or taxable income in 2005.