I won a truck! Taxes and 1099's

[Howlmoon]

What is the name of your state (only U.S. law)? FL!

So a few weekends back I won a truck! Very happy!
However the truck was a demo from the dealer, with about 12,000 miles on it.
So I'm still not complaining!

To drive off with the truck, I paid the state tax (based on new value of $29,000) and title fee. Ok no problem.

Now I understand that a 1099 will be issued with the full value of the new truck.
The dealer has assured me that the 1099 will say $29,000.

I don't think its quite correct that the 1099 will show $29,000 for a used vehicle. Rather, the fair market value of the vehicle is closer to $18,000. The dealer even offerred to buy it back from me for $17,000.

Should I just take the 1099 that will be coming next January which will have $29,000 on it, and instead, put the true market value of the truck onto my income (say, $18,000) on my 1040?

Or should I argue with the dealer and get them to send an 1099 with true market value on it? (I don't think I'll win this argument).

In either case, I can get an accurate assessment of the truck's true value with 12,000 miles on it at Autonation or Carmax, they tell me exactly what they'd buy it for.

Do 1099's have to exactly match what you report on the 1040?

 

[tranquility]

Your income is the fair market value of the truck. That is what you report. To try to prevent the inevitable IRS letter, attach a statement to the back of the return regarding the prize.

The calculation of the FMV is a facts and circumstances kind of thing. Looking up general things in a Blue Book may not be defensible. A qualified appraisal or a legitimate, immediate and arm's length offer might be more defensible.

 

[davew128]

In addition to Tranquility's correct advice, I would also suggest looking into the state tax paid on the vehicle. You may be stuck but its also possible you paid too much as the FMV of the vehicle was clearly far less than the value you paid tax on.

 

[Howlmoon]

Another interesting development

So Fair Market value it is! I will obtain a quote from Carmax today.

Another interesting development is that the dealer called today, asking if it would be ok if they wrote me a check for $29,000 and then promptly have me sign it back over to him.

I told him that it now appears that I won the truck, but ALSO a cash prize. Or at the very least, I am agreeing to the value of the truck being $29,000.

This can't be normal practice and frankly, is not in the rules of the contest.

I'm not inclined to go along with their check sign-over party.

Any thoughts?

 

[tranquility]

If you're suspicious, go there, wait for them to hand you a check and then say, "I'll have to check with my attorney" and then leave with the check.

 

[LdiJ]

So Fair Market value it is! I will obtain a quote from Carmax today.

Another interesting development is that the dealer called today, asking if it would be ok if they wrote me a check for $29,000 and then promptly have me sign it back over to him.

I told him that it now appears that I won the truck, but ALSO a cash prize. Or at the very least, I am agreeing to the value of the truck being $29,000.

This can't be normal practice and frankly, is not in the rules of the contest.

I'm not inclined to go along with their check sign-over party.

Any thoughts?

Oh heck no....do not even contemplate agreeing to do that.

In fact, I would forgoe the prize before even remotely agreeing to that.

In fact again, I would tell the dealer that I would happily accept the cash value of the prize in lieu of a truck.

 

[Howlmoon]

Oh heck no....

Certainly a strong reaction there, but can you provide some insights as to why its such a "heck no" situation? It does sound fishy to me, and I really don't want to do it and will avoid this situation at all costs. What are your intial thoughts as to HECK NO WAY!

 

[cyjeff]

Anytime someone wants to deposit a check in your account so that you can write them one back for the exact same amount RUN... far and fast.

Even if their check clears the account (which I give a 50/50 chance) and you are not out the money, you are OBVIOUSLY helping them to create a fraudulent paper trail.

Live by the assumption that you will have to stand in front of a judge and explain why you are doing it. If you don't know why, don't do it.

 

[Howlmoon]

correction

The dealer wants to write me a check for $29,000, then have me sign it over to him - right there on the spot. Sounds kind of unusual, but maybe its a legitimate way for him to keep his accounting?

 

[anteater]

Sounds kind of unusual, ..

It is.

...but maybe its a legitimate way for him to keep his accounting?

It isn't.

But I wonder... A way for the dealer to claim it as a sale in reporting to the manufacturer? Receive the manufacturer holdback and other dealer incentives?

 

[LdiJ]

It is.


It isn't.

But I wonder... A way for the dealer to claim it as a sale in reporting to the manufacturer? Receive the manufacturer holdback and other dealer incentives?

Maybe, but its also likely that its a way to take a full priced write off for a truck that's worth considerably less than 29k...and to justify a 1099 for 29k when the truck is only worth 18k.

If it were me, I wouldn't even accept the prize, or would have accepted the cash in lieu of the prize.

 

[Howlmoon]

That's water under the bridge at this point as I'm driving the truck. Funny, the dealer has not pushed further for me to sign this check. I think its a closed deal at this point!