Debate On Rake/Rakeback Tax Treatment

[Wake up CALL]

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I'm not sure what you are trying to say... are you disageeing that the court said that the comps were only taxible if they increased the taxpayers wealth?



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Not only am I disagreeing with that interpretaion the court did as well. Comps are all indeed taxable, period.

[Niediam]

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[ QUOTE ]
I'm not sure what you are trying to say... are you disageeing that the court said that the comps were only taxible if they increased the taxpayers wealth?



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Not only am I disagreeing with that interpretaion the court did as well. Comps are all indeed taxable, period.

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I seriously think you must be reading something wrong. I really don't know what else to say.

[CaptVimes]

What the article says, is that comps increase the wealth of the person who recieves them. They do allow it to be treated, however, as gambling income which can be offset by gambling loses. This is much better than treating as ordinary income with no deductions. No where in that article was there anything that said there was any difference between tangible and intangible comps. I think that is what your argument is about.

[Niediam]

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What the article says, is that comps increase the wealth of the person who recieves them. They do allow it to be treated, however, as gambling income which can be offset by gambling loses. This is much better than treating as ordinary income with no deductions. No where in that article was there anything that said there was any difference between tangible and intangible comps. I think that is what your argument is about.

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No, the case said that the comps in that specific case were taxable because they increased the wealth of the person who received them (the guy got several cars).

[CaptVimes]

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[ QUOTE ]
What the article says, is that comps increase the wealth of the person who recieves them. They do allow it to be treated, however, as gambling income which can be offset by gambling loses. This is much better than treating as ordinary income with no deductions. No where in that article was there anything that said there was any difference between tangible and intangible comps. I think that is what your argument is about.

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No, the case said that the comps in that specific case were taxable because they increased the wealth of the person who received them (the guy got several cars).

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Similarly, cash back and other such payments are taxable. Non-cash comps are also technically taxable, but it seems the IRS is treating them like frequent flyer miles; the government has shown little interest in forcing millions of people to declare these non-cash benefits. Thank heaven for small favors. The bottom line: If you get a Form 1099-MISC, then it goes on your tax bill, but don’t sweat the free hotel room (unless it’s your primary residence). As the IRS says in Publication 529 – Miscellaneous Deductions, “Your tax liability depends on your particular facts and circumstances.”

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From this article

Your right but not for the reasons you think.

After dealing with the IRS as part of what I do for a living I know they would define a comp as income regardless of the form it comes to you. The problem for the IRS though is how to track this. You seem to be under the impression that an increase in wealth has to strictly be either cash or some other tangible good. Insurance agents frequently get free trips as bonuses for what they sold. Is it tangible? No. Do they get 1099'd for it? You bet and therefore have to pay taxes.

I still contend that the above case you cited is more about how to treat comps, as gambling income not ordinary income, rather than the taxability of a non-tangible comp.

One final thing, just because the IRS is not enforcing it now, doesn't mean they wont start trying to in the future. The IRS goes where the money is.

[StellarWind]

I own the book and I have read the relevant chapter.

The court found in favor of the taxpayer that comps are gambling winnings. It allowed the taxpayer to offset the value of the comps against his extensive losses. No distinction is made between different types of comps.

Quite the contrary, on P.18 the author says:

"... importance of proper documentation of losses is evident. Without it, the possibility of paying tax on what was thought to be a free room or meal becomes reality."

[dragonystic]

Ned Flanders: "Oh, golly, if that doesn't put the shaz in shazam. Oh listen, what's the cash value of those tickets so I can report it on my income taxes?"