Dick Adams <rdadams[at]panix.com> wrote:

- quote -

The manufacturer offers a $25 rebate on what's usually a $50
item.

A web store has it on sale for $30. Google Checkout offers
$10 off a $30 purchase.

So I pay $20, and get a $25 rebate. Is the $5 taxable?

Seth

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Dick Adams wrote:

- quote -

And they pry your return from your cold, dead hand? Are you
sure you don't work for the IRS?

- quote -

It could be argued that if the rebate lowers the price below
a reasonable amount (e.g. in relationship to the retailer's
cost) it could lose its character as a rebate and become
gambling income.

Stu

Moderator:
LOL - Excusez-moi! I'm the one taking the pro-taxpayer
position. But let us wait for the 1099's!

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Dick Adams wrote:

- quote -

Or until they pry the IRC out of your cold, dead hands!
(similar to Charlton Heston's comment of course; couldn't
resist, Dick.

ChEAr$,
Harlan

Moderator:
Stu couldn't resist either. I thought that came from
'Men in Black', but then I don't belong to the NRA.

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Bob Sandler wrote:

- quote -

Jordan's Furniture offered to rebate the purchase price if
the Sox won the World Series. An earlier reply of mine
seems to have been lost in the ether.

I find this to be a conditional sale. I.e., a sale that
would not be completed until certain conditions were met.
Sox win, your price is zero. Sox lose, your price is equal
to today's price. The money turned over to Jordan's at the
time of sale would be nothing more than a deposit.

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My position will remain that this is a contingent rebate
- at least until the final appellate decision says different.

The furniture store advertised they would rebate the
purchase price of certain items if and only if the Boston
Red Sox won the 2007 World Series.

The concepualization problem may be because this is a 100%
rebate and is may be viewed as a refund. What if it was a
25% rebate? or a 50% rebate? It's still a rebate.

When did rebates become taxable income?

Dick

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Harlan Lunsford <fg1jsc$pnh$1[at]panix2.panix.com> wrote:
- quote -

Thinking about it more, I agree. I've seen 100% rebates
before, and the likelihood of receiving some of them (e.g.
CompUSA on Norton) is comparable to that of Boston winning
the World Series. And there's been no suggestion that those
are taxable.

Seth

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Bob Sandler <bob_usenet[at]yahoo.com> wrote:
- quote -

More than $1; rather, whatever the store paid for its
insurance would be the fair price. But if several things
are purchased together (and cannot be unbundled), the
pricing for each is an interesting issue.

Seth

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No one has yet addressed the question (mentioned briefly by
kastnna in an earlier post) of whether the store or the
insurance company will report the refunds on either a W-2G
or a 1099-MISC. Whether and how it gets reported is going
to affect how the buyers report it on their tax returns. The
OP mentioned bedroom sets and a full refund of the purchase
price, so the refunds are likely to be large enough that
they have to be reported, unless the company making the
payments considers it a rebate. If it's not a rebate, the
proper reporting, of course, depends on whether you consider
it gambling income or a prize.

I'm sure neither company considers itself to be in the
gambling business, so they are unlikely to even think of
issuing a W-2G. Having seen a lot of reports of incorrect
1099s in the past, in this group and elsewhere, I expect
that the rebates will be reported in 1099-MISC box 7
(nonemployee compensation), because that seems to be the
knee-jerk reaction of any company reporting any payment
other than salary, even though it's obviously wrong. This
will put every one of the buyers in the position of having
to do battle with the payer, the IRS, or both.

Bob Sandler

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Dick Adams <rdadams[at]panix.com> wrote:

- quote -

I don't think so. The IRS will take the position that $1 was
the price of the lottery ticket, and whatever the buyer paid
in addition to that $1 was the price of the furniture. The
rebate is gambling income, and the $1 cost of the ticket is
deductible on Schedule A.

Bob Sandler

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NadCixelsyd <nadcixel...[at]aol.com> wrote:

- quote -

Since the Jedi Knights of Boston won the World Series on
Sunday night, this issue is now a tax reality. I've thought
this out as best I could and have come up with what I believe
are reasonable positions for both the taxpayer and the IRS.

The taxpayer takes the position that the furniture was
purchased at full price plus the insurance premium without
the possibility of negotiating discount in return for a
contingent rebate, i.e., return of capital, and rebates are
not taxable income.

The IRS takes the position that the purchase was analogous
to buying a lottery ticket. Therefore, the rebate is Other
Income and the cost of the ticket is deductible as a
gambling loss on Schedule A.

IMRHO, the two positions are a wash unless the taxpayer does
not have enough expenses to make a difference on Schedule A,
e.g., the poor and the retired.

Considering it is near impossible to get elected to public
office in Massachusetts without swearing allegiance to the
Red Sox, the taxpayers' position should prevail.

Dick

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NadCixelsyd <nadcixel...[at]aol.com> wrote:

- quote -

I guess a lot of buyers are lining up for their free
furniture this morning :-)

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NadCixelsyd <nadcixelsyd[at]aol.com> wrote:

- quote -

I don't see any meaningful distinction between this and
gambling or something like the Publishers Clearing House
Sweepstakes. The outcome wasn't based on pulling a number
out of a hopper but on something that was beyond the control
of the seller or the buyer, equivalent to an aleatory event
with respect to them and the transaction. The buyers were
either actually gambling on the outcome of a sporting event,
with odds of 2-to-1 and the winnings paid in the form of
furniture, or they were getting non-cash prizes. Either way,
wouldn't that be treated as gambling winnings?

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Seth wrote:

(snipped...)

- quote -

I for one lean towards the rebate on purchases school of
thought.

- quote -

And what, pray tell, would be the difference between a full
or partial refund? Would one be taxable while the other not
be?

And since furniture stores carry the most liberal terms,
i.e. 90 days same as cash, when one eventually pays the bill
after 90 days, it is then that the final purchase price is
determined.

As it might just be tonight.
I hope not.

ChEAr$,
Harlan

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Dick Adams <rdadams[at]panix.com> wrote:
- quote -

"Insurance" or "gambling"? Does the refund count as
gambling winnings? (What is the insurable interest of the
furniture _buyers_? I suppose if they _sold_ the Red Sox
winning, against their furniture purchase, that would be
hedging.)

I would think it does count as income of some sort.

A partial refund might not. I've known stores to offer
"Random percentage (10%-90%) off" sales, where you pick a
slip to learn your discount after the goods are rung up.
The price paid is just a sale price, not a taxable event.

Seth

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NadCixelsyd <nadcixel...[at]aol.com> wrote:

- quote -

Ohhhhh. Terribly sorry. Furniture BUYERS, not furniture
store. That makes more sense. I would think it would be
earned income in the year they received the "refund". They
did not have to give back the furniture so their disposable
income increased by the amount of the refund.

If this is correct (which it may very well not be), does the
furniture STORE issue 1099s?

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NadCixelsyd <nadcixel...[at]aol.com> wrote:

- quote -

Seems to me that you have a "conditional rebate" which I
suspect is not taxable income. The seller buried the
insurance premium in the price of the furniture and, thus,
you effectively paid for the insurance.

I seriously doubt that he can refund your sales tax cause
it's those sales tax auditors who give the rest of us a bad
name.

This is an excellent marketing ploy because it brings in
customers who might not have come otherwise and it cuts down
on negotiations. Unfortunately it is probably ineffective
in most cities with alleged MLB teams (Baltimore, Washington,
Pittsburgh, Kansas City, etc.)


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"NadCixelsyd" <nadcixelsyd[at]aol.com> wrote

- quote -

A "gift" from God ????

--
"A celebrity is a person who works hard
all his life to become known, then wears
dark glasses to avoid being recognized."
Fred Allen

--
Paul A. Thomas, CPA
Athens, Georgia

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NadCixelsyd <nadcixel...[at]aol.com> wrote:

- quote -

For starters, those insurance policies aren't really that
unusual. Those half court basketball shots they give away a
million bucks for... the free $60k Cadillac to the PGA
golfer that makes a whole in one... They're mostly covered
by insurance policies. There are dozens of companies out
there that make it their sole business to ensure promotional
contests.

As for the tax implications, what exactly do you mean? I
would think that the insurance premium(s) are a business
expense, any claim payouts are reported as income to the
business and in this case are offset by a presumably
equivalent business expenses (refunds to customers). Its all
just a bunch of credits and debits on the company books.

Maybe I'm missing what you are really asking? If so, please
enlighten me.

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Last spring, a Massachusetts furniture store offered to
refund your money on select furniture (bedroom sets?) if the
Red Sox won the World Series. Sales surged. The furniture
store covered themselves with an insurance policy, "That
way, we're rooting for the Red Sox, too".

Way back in March, the Red Sox probably had an 10% chance of
winning. At this point, I think the Red Sox have about a 70%
chance of winning. What are the income tax implications for
the furniture buyers if the Red Sox do win?

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