1099-MISC


F

felix

I participated in a usability study at Microsoft. They gave
me a piece of software as gratuity. They have mailed me a
1099-MISC form that has the gift (listed as "other income")
worth $799.00.

I did not open the gift, I instead sold it on ebay for
$350.00.

I would like to pay taxes only on the $350.00 (which is what
I believe the software is really worth anyway).

Since the IRS knows I "made $799.00", how do I remedy this
when I file my taxes?

My guess (but I know little about taxes) is to:

1. fill out $799.00 on the 1099-MISC form.
2. Fill out a Schedule C that lists a loss (under "Other
Exp.") of $449.

Thanks in advance for help!

Felix
 
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Phil Marti

felix said:
I participated in a usability study at Microsoft. They gave
me a piece of software as gratuity. They have mailed me a
1099-MISC form that has the gift (listed as "other income")
worth $799.00.

I did not open the gift, I instead sold it on ebay for
$350.00.

I would like to pay taxes only on the $350.00 (which is what
I believe the software is really worth anyway).

Since the IRS knows I "made $799.00", how do I remedy this
when I file my taxes?

My guess (but I know little about taxes) is to:

1. fill out $799.00 on the 1099-MISC form.
2. Fill out a Schedule C that lists a loss (under "Other
Exp.") of $449.
Regardless of the amount, it goes on line 21 of the 1040,
not Schedule C unless this activity was in the course of
conducting your trade or business.

The 1099 value is no doubt bloated, but I suspect the ebay
selling price was less than FMV, which was your amount of
income. I'd stop by one of the big box stores and see what
it sells for at retail.
 
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S

steve-o

felix said:
I participated in a usability study at Microsoft. They gave
me a piece of software as gratuity. They have mailed me a
1099-MISC form that has the gift (listed as "other income")
worth $799.00.

I did not open the gift, I instead sold it on ebay for
$350.00.

I would like to pay taxes only on the $350.00 (which is what
I believe the software is really worth anyway).

Since the IRS knows I "made $799.00", how do I remedy this
when I file my taxes?

My guess (but I know little about taxes) is to:

1. fill out $799.00 on the 1099-MISC form.
2. Fill out a Schedule C that lists a loss (under "Other
Exp.") of $449.
That's some "gift"... Did they tell you this up front?.
Sounds right with the Sched C. If you sold on ebay to
someone in your state you may oew sales tax. I wonder if you
owe USE tax..
 
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C

cpabakem01

This happens all the time on game shows, etc. You only have
to report the FMV of the gift. Report the e-bay amount and
attached copy of info from e-bay to support it.
 
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H

Herb Smith

felix said:
I participated in a usability study at Microsoft. They gave
me a piece of software as gratuity. They have mailed me a
1099-MISC form that has the gift (listed as "other income")
worth $799.00.
This was no gift, but rather payment for services rendered,
and subject to tax.
I did not open the gift, I instead sold it on ebay for
$350.00.

I would like to pay taxes only on the $350.00 (which is what
I believe the software is really worth anyway).
Sounds like that might be the "street price" for this software.
Since the IRS knows I "made $799.00", how do I remedy this
when I file my taxes?

My guess (but I know little about taxes) is to:

1. fill out $799.00 on the 1099-MISC form.
2. Fill out a Schedule C that lists a loss (under "Other
Exp.") of $449.
No Schedule C is needed, especially since the 1099-MISC
lists the amount under Other Income (box 3). Just claim your
$350 on Line 21 of form 1040. Note the source on the dotted
line or with an attached statement.
 
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S

Seth Breidbart

Phil Marti said:
The 1099 value is no doubt bloated, but I suspect the ebay
selling price was less than FMV, which was your amount of
income.
Why wouldn't the eBay selling price meet the _definition_ of
FMV?

Seth
 
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H

hlunsford

Why wouldn't the eBay selling price meet the _definition_ of
FMV?
Because it is not what "a willing buyer would pay a willing
seller, neither being under compunction to trade."

On E-bay as I understand it, people sell at any price they
can get, regardless of "street" value. the latter is what
an item sells for at regular stores at discounted value.
In this case, retail value of 800$ software might regularly
sell for 600 or even 547$, depending on where you find it.
The average of quoted prices would appear to more closely
approximate FMV i think.

ChEAr$,
Harlan Lunsford, EA n LA
 
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S

Seth Breidbart

Because it is not what "a willing buyer would pay a willing
seller, neither being under compunction to trade."
Which of those doesn't apply? You have a willing buyer, a
willing seller, and neither one is under any compunction; OP
could certainly have just kept the software, and while the
buyer might have needed it, he could certainly have bought it
elsewhere.
On E-bay as I understand it, people sell at any price they
can get, regardless of "street" value.
People sell for the high bid, provided it's high enough (which
is up to the seller).
the latter is what an item sells for at regular stores at
discounted value.
So if something generally costs around $500 and up at "regular
stores" and $450 on the web (e.g. a bundle of 20 hardcover
books), you wouldn't accept the $450 as FMV?
In this case, retail value of 800$ software might regularly
sell for 600 or even 547$, depending on where you find it.
The average of quoted prices would appear to more closely
approximate FMV i think.
If he _kept_ it, then I'd agree.

Seth
 
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V

Victor Roberts

Because it is not what "a willing buyer would pay a willing
seller, neither being under compunction to trade."

On E-bay as I understand it, people sell at any price they
can get, regardless of "street" value. the latter is what
an item sells for at regular stores at discounted value.
In this case, retail value of 800$ software might regularly
sell for 600 or even 547$, depending on where you find it.
The average of quoted prices would appear to more closely
approximate FMV i think.
Selling on eBay is not an under-the-counter transaction. It
is also not a private transaction between people who may
sell at a lower than normal price as a favor to a friend.
eBay is a very large, open and public marketplace. Many or
even most of the items are used, or obsolete or custom
designs that are sold only on eBay. I believe that only a
small fraction of the items are new and current items that
you can buy through other outlets during the same time
frame.

Certainly eBay prices for any used, obsolete or eBay-only
items would constitute FMV, as these are the ONLY prices for
those exact items. That leaves only those items that are
currently available through "normal" retail outlets and your
opinion that an eBay transaction does not represent what "a
willing buyer would pay a willing seller, neither being
under compunction to trade." Sellers on eBay are under no
compunction to trade until they place the item for auction,
and then they set both the starting price and a so-called
Reserve Price (a sort of hidden starting price) if they
desire. Buyers on eBay are under no compunction to buy,
until they place a bid, which is like any other contract to
purchase something. How does eBay differ from an auction
for paintings, for example, that can also be used to set the
FMV? Or the process of purchasing a house when other people
are also bidding on the same property?
 
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hlunsford

The 1099 value is no doubt bloated, but I suspect the ebay
Which of those doesn't apply? You have a willing buyer, a
willing seller, and neither one is under any compunction; OP
could certainly have just kept the software, and while the
buyer might have needed it, he could certainly have bought it
elsewhere.
People sell for the high bid, provided it's high enough (which
is up to the seller).
So if something generally costs around $500 and up at "regular
stores" and $450 on the web (e.g. a bundle of 20 hardcover
books), you wouldn't accept the $450 as FMV?
If he _kept_ it, then I'd agree.
My reply is largely based on my perception of eBay being a
flea market where prices are just so darned low as to defy
realistic FMV.

But maybe a taxpayer could justify the eBay price as being
FMV. Just depends on the IRS auditor he draws.

ChEAr$,
Harlan Lunsford, EA n LA
 
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D

DF2

My reply is largely based on my perception of eBay being a
flea market where prices are just so darned low as to defy
realistic FMV.
It's like an auction, and you are looking at the start of
bidding probably. The real price action is usually at the
end. You have to watch a particular auction, or look at
closed auctions to see what things actually sold for.
 
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S

Stuart A. Bronstein

Which of those doesn't apply? You have a willing buyer, a
willing seller, and neither one is under any compunction; OP
could certainly have just kept the software, and while the
buyer might have needed it, he could certainly have bought it
elsewhere.
I agree completely.
People sell for the high bid, provided it's high enough (which
is up to the seller).
I understand that a majority of eBay auctions end without
the item being sold. The seller doesn't have to sell at any
price just because someone bids it. He sells it for a price
he is willing to acccept.

Stu
 
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S

Stuart A. Bronstein

hlunsford@bellsouth.net said:
My reply is largely based on my perception of eBay being a
flea market where prices are just so darned low as to defy
realistic FMV.
Actually that's not quite true. Sometimes you can get
bargains - it all depends on who is bidding. So something
that you may be able to get for $50 today might cost you $80
next week.

Some things (particularly collectables) actually command a
higher price, because people all over the world who want it
will bid.

Besides. Fleamarket prices are fair market value, from a
legal standpoint.

Stu
 
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L

LTSLLC

Use the eBay selling price and report it on line 21 of your
Form 1040.

Be sure to keep a copy of your auction listing showing the
selling price in case you have to support that later, but
don't attach it to your original tax return as no one will
look at it if the issue comes up later.

Rudy
www.LizcanoTaxServicesLLC.com
 
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H

hlunsford

This happens all the time on game shows, etc. You only have
to report the FMV of the gift. Report the e-bay amount and
attached copy of info from e-bay to support it.
By now you've noted the other replies regarding fmv.

the trouble with the "ebay" value, is that it starts out
being the rock bottom amount that seller will accept, and
subject to change during the bidding. A final price would
be closer to "street" value.

ChEAr$,
Harlan Lunsford, EA n LA
 
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H

hlunsford

felix said:
I participated in a usability study at Microsoft. They gave
me a piece of software as gratuity. They have mailed me a
1099-MISC form that has the gift (listed as "other income")
worth $799.00.

I did not open the gift, I instead sold it on ebay for
$350.00.

I would like to pay taxes only on the $350.00 (which is what
I believe the software is really worth anyway).

Since the IRS knows I "made $799.00", how do I remedy this
when I file my taxes?

My guess (but I know little about taxes) is to:

1. fill out $799.00 on the 1099-MISC form.
2. Fill out a Schedule C that lists a loss (under "Other
Exp.") of $449.
Do not report on schedule c unless you're in business and
this was business related.

However, even though it may not have had a street value of
799, it's value may have been more than the 350 you actually
got. Notice I said "street value"? Check the web and
stores to find the rock bottom "street" price and report
that on your 1040.

ChEAr$,
Harlan Lunsford, EA n LA
 
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Seth Breidbart

wrote:
However, even though it may not have had a street value of
799, it's value may have been more than the 350 you actually
got. Notice I said "street value"? Check the web and
stores to find the rock bottom "street" price and report
that on your 1040.
He sold it on eBay. How does that not define fmv for that
particular copy? (Maybe it wasn't eligible for a rebate
that sales through regular dealers got.)

Seth
 
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