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you actually won't pay taxes on this amount
was this boat purchased for pleasure or business?
pleasure use... right, but why are they insisting on issuing a 1099, seems silly and our negotiations have been more than difficult
I understand your frustration, but the rule they're using is the one that states anytime you have a transaction that involves more than $600, you must issue a 1099
in effect, you have "sold" the boat back to the dealer for the original purchase price plus the expenses you incurred
That's what we are stuck on 'transaction', if it is a canceled sale and handled like a return why is it any different from going to a retailer, making a purchase and then returning the item (keeping in mind the $600 threshold)?
We have a written agreement that clearly does not use words like sale, purchase, etc. for that reason. We are also planning to file a form with NYS Tax and Finance to recover our sales tax paid.
you will report this transaction on 2009 Form 1040 (Schedule D)Capital Gains and Losses
as "personal property"
you will not be able to take any loss, but since they are only refunding your purchase price plus expenses, they should "0" ut
If they do not reimburse the sales tax, then you may still claim it
We are taking a loss, even with the repayment and plan to sue the dealer as well, but can you tell me if there anything is the IRS tax code that mandates the issuance of the 1099 or is there anything that supports position that we don't want it? What about the attorney accepting the 1099 since the funds are being placed in his escrow account?
Our total costs are about $300K and the agreement is for $250K
You can not take a loss on the sale/return of personal property. At best, XXXXX XXXXX "o" out the $ the boat dealer reimburses you.
If you choose to sue the dealer, that's fine. Nothing is reportable unless you actually recover damages
I understand you are taking a $50,000 hit here
so yes, you have a loss
however, since the boat was personal property, IRS will not recoginize your loss
however, the courts might
the 1099 is a formality, and in effect, might make your court case stronger
What are the downsides to accepting the 1099, if any?
in this case....as long as they report it correctly, (not in box 7) nothing
you must file the Sch D in order to "0" it out though
We are frightened that this will act as some kind of red flag with IRS...
not at all
just remember you can't take the loss on the Sch D
also, the 1099 will be of help to your attorney
proves they had to refund your purchase price plus the costs you put into the boat
we are making this settlement privately, if we went to court and received the refund would the 1099 apply then as well? Several people in the manufacturing business have advised us that they would not issue 1099 in this situation, thats one reasons we are hesitant
Well, I have to admit I've never seen a 1099 for this particular situation, but I absoutely know it won't hurt you on your taxes
I look at this as proof the boat was defective
but this is something you need to take up with your attorney
Okay, that helps...we don't really need proof of the defect, since the settlement is with manufacturer and not dealer. We have been in the most awful situation with them for 6 mos and have found that some, if not all, of the clauses are either self serving or intended to harm us financially
I'm truly sorry that this is being made more difficult for you than it should be
Would it be fair to say that it is not 'necessary' to issue 1099?
Ugh -- thanks!
I wouldn't issue one, but they are going to do whatever they think they need to do
if you have a good tax accountant who knows how to handle this, the 1099 is truly a non-issue tax wise
Agreed, but this is the last point we are trying finalize in our agreement before we sign, so we wanted to be more educated with our position.
as long as they do not put the $ amount in box 7, "non employee comp" , accept the 1099 and "0" it out on your taxes
okay, thank you very much! I am clicking on the green button :-)
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