Prior year S-corp refund

[DTS]

’06 S-corp estimates were overpaid on the CA corp return, which generated a State tax refund. This refund was applied to the first CA ’07 estimate for the corp.

Question: does it follow that the S-corp would have to claim this back as income on the ’07 1120S and then take the deduction as estimate expense? If so, where would the input for the income go, other income?

Thank you.

[JON]

Are you

accrual or cash. The state tax refund is always income to the federal if a deduction is allowed for state income taxes. If on accrual it should have been booked as refundable and income in 06, on cash it would be income 07 and expense if paid.

[DTS]

Jon

My clients are cash.

[DTS]

Jon

Thank you for the help. I believed this the case, but was second-guessing myself.

D