in 2021, aurora received a $25,000 bonus computed as a percentage of profits. in 2022, aurora's employer determined that the 2021 profits had been incorrectly computed, and aurora had to refund the $8,000 in 2022. assume that aurora was in the 35% tax bracket in 2021 but in the 12% bracket in 2022.
a. In 2021, how much is Aurora required to include in income?
b. In 2022, what is the amount of the deduction Aurora can claim? What is the reduction in taxes for 2020 as a result of the deduction?