> As long as the $16K was not used on your 2004 return to gain
>> a tax benefit, receipt of the refund is not taxable income.
>> Ignore it.
> That's what we decided to do, but since the state of MD has reported
> this as arefund to the IRS, I figure that an audit is a certainty. We
> were hoping to avoid that.
Why? I see nothing certain or even highly probable about an audit. Of course, that doesn't mean you won't be audited, just that I'll be surprised if you are.
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