Re: Pay Taxes on Service Won but not Used?

Unsolicited samples are only income if they're accepted. See, e.g.,
Rev Rul 70-498 (taxpayer only has income when he accepts unsolicited
books, gives them away to a charity, and claims a charitable
deduction); Haverly v. US (same; claiming charitable deduction imputes
ownership).

If you never accepted the unsolicited sample in the first, place, you
won't have income. If the company sends you a 1099, don't include the
amount in income; instead, retain the 1099 and include a disclosure
statement on Form 8275 (disclosure on this form is, according to the
IRS and the regs, the only way to avoid any potential penalties based
on a failure to adequately disclose; in the case described, it probably
isn't strictly necessary, but why take chances? Use a Form 8275). The
disclosure statement should refer to the 1099 (a copy of which should
be included) and should state that you never accepted the unsolicited
sample, and accordingly you haven't included the value of the gift in
income.


Arthur Kamlet wrote:
In article <1157233577.115912.150440@xxxxxxxxxxxxxxxxxxxxxxxxxxxx>,
<nielloeb@xxxxxxxxxxx> wrote:
What if you win a service but you don't use it. Are you still liable
for the taxes?

Here are examples of what I'm talking about:
A gift certificate to a local day spa. You hate spas and throw away
the certificate.
10,000 free minutes on a cell phone plan to which you don't subscribe.
One year of cable TV service, but you already have satellite and never
call the cable company to subscribe.



No tax.



You attach a statement to the 1040 line 21 saying



1099 received for prize/award of services $2000



less services not accepted or performed (2000)


Net income 0

--

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

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