Tax Law (Questions About Taxes)/"Prize" winnings?

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Expert: Helen P. O`Planick, EA - 2/11/2006


Question
I won some TV/stereo equipment from American Express during a "rewards points" promotion in 2005.  

AMEX recently issued me a 1099 for $6000 based on the MSRP of the equipment.  However, the equipment only had/has a market value of $2500.  For example if you were to purchase all of it brand new from Amazon.com, it would cost $2500  (I sold the equipment new on eBay for $2000).  

Is there anything I can do to reduce my tax liability lower than $6000?  

Answer
You just need to have proof that the real value is lower then the 1099, then you put on line 21 - 1099 misc 6,000, actual retail value 2,500 and put the 2,500 on the line to add into income.

Do not mail the proof to the IRS, keep it in your records in case they want it.

Helen, EA in PA

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Helen P. O`Planick, EA

Expertise

I am a tax professional, with experience in individual taxation. I would prefer not to answer questions about non-resident aliens or corporate taxation. Please do not ask me state related questions, unless the state is Pennsylvania. There are 42 taxing states and 42 TOTALLY different sets of state tax law.

Experience

I have been preparing tax returns almost all my life. I have been in professional practice for 25 years and I am enrolled to practice before the Internal Revenue Service.

Organizations
National Association of Enrolled Agents

Publications
I am a prior Money Magazine Tax Test taker and have been quoted extensively in all media including monthly periodicals and books by tax authorities.

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