In 2011, a taxpayer claimed an American Opportunity Tax Credit. In 2012, the student receives a scholarship and a refund of tuition that had been the basis of the 2011 credit. What should the taxpayer do?
a. Incorrect. The taxpayer cannot ignore the receipt of the tax-free assistance, even though the 2011 return has been filed.
b. Incorrect. The taxpayer should not file an amended return for 2011 to refigure the credit.
c. Incorrect. While the taxpayer must figure a recapture amount, it is not reported on the 2012 return as other income on Form 1040, line 21.
d. Correct. Report the recapture amount on the 2012 return as additional tax.
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