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Old 01-29-2009, 11:24 AM
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Received 1099-MISC with no services rendered

I received a 1099-MISC from a homebuilder for an amount equal to gift cards that I received at closing. Our agreement in the contract was that we would pay the agreed on price and they would provide $5000 cash at closing for us to purchase appliances, in lieu of them purchasing them. A few days before closing the bank came back and said that they were not able to allow the cash back at closing and the form of payment must be a gift card. This was done, and now I received a 1099-MISC with that $5000 in BOX 7. Everything that I have been reading makes me think that this in incorrect because no services were rendered by me and it was a part of the contract. Is this something that needs to be corrected with the company and do I have any ground to stand on here? Thanks.



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Old 02-02-2009, 11:48 PM
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The IRS would characterize that you received a value or consideration equal to the amount the homebuilder reported on the 1099-Misc representing the amount equal to the gift cards.

As such, this is a common problem that taxpayers have tough time understanding as no actual cash was received by them. In your case, I can actually understand your frustration that you never expected to receive a 1099-Misc for the gift cards. This is a similar situation one encounters with Banks and Financial Institutions that issue a gift certificate for opening a bank account. These are all generally a reportable transaction and so you are going to be stuck with having to pay taxes on this amount.

By the way, I am curious as to whether or not the homebuilder told you prior to issuing you these gift cards, that these gifts may be taxable or not and reported on a 1099-Misc to the IRS. The only good point here is that I suspect that the amount of value of the gift cards reported on 1099-Misc may not be subject to the S/E tax. I would consult with your CPA to confirm this point.

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Old 02-05-2009, 10:44 AM
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Originally Posted by TaxGuru View Post
By the way, I am curious as to whether or not the homebuilder told you prior to issuing you these gift cards, that these gifts may be taxable or not and reported on a 1099-Misc to the IRS. The only good point here is that I suspect that the amount of value of the gift cards reported on 1099-Misc may not be subject to the S/E tax. I would consult with your CPA to confirm this point.
I was not informed that the gift cards may be taxable prior to receiving the 1099-MISC. It was explained to me that they could either purchase the appliances for the house for us, or give us money to purchase them ourselves. We chose to purchase them ourselves to have some say in the selection criteria.

Thanks for the reply TaxGuru.



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Old 02-05-2009, 12:53 PM
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I know this might be a little distressing to you, but you would be liable for the taxes on the total amount reported on the gift cards. Fortunately, like I mentioned earlier, this income is not subject to S/E taxes, in my opinion!

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