Fin 321 - Chapter 2: Research Problem 2

881 Words Aug 8th, 2014 4 Pages
Question – Chapter 2: Research Problem 2
When Oprah gave away Pontiac G6 sedans to her TV audience, was the value of the cars taxable? On Labor Day weekend in 2006, World Furniture Mall in Plano, Illinois, gave away $275,000 of furniture because the Chicago Bears shut out the Green Bay Packers in the team’s football season opener at Lambeau Field in Green Bay (26-0). Was the free furniture in the form of a discount or rebate taxable, or should the furniture company have handed the customers a Form 1099-MISC?
Response
After thoroughly researching taxable and nontaxable income, the Pontiac G6 sedans awarded to Oprah’s television audience would have been subject to federal taxation and included in their gross income. The Code of Federal
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Luckily she had won some money playing the game Plinko and had some money saved up in order to pay the state tax ahead of time and then sold the rest of the items minus the car and invested in a food truck business. Unfortunately, not all contestants are that lucky (shine.yahoo.com). As for the discount or rebate regarding the furniture bought by customers the weekend the Chicago Bears shut out the Green Bay Packers, research shows that the amount awarded the customers was regarded as a “cash rebate or refund.” The owner of World Furniture Mall, Randy Gonigam, had advertised the free furniture promotion prior to the weekend that the Chicago Bears played the Green Bay Packers and therefore any customer that bought furniture from World Furniture Mall that weekend was consequently awarded their refund or rebate (furninfo.com). According to the Code of Federal Regulations, “refunds are amounts paid back or a credit allowed on account of an overcollection” (Purchase discounts and allowances, and refunds of expenses). Section 413.98 further states that “all discounts, allowances, and refunds of expenses are reductions in the cost of goods or services purchased and are not income.” In 1956, Pittsburgh Milk v. Commissioner (26 T.C.