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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120812  
Subject: Re: Interest on a free phone Date: 7/16/2006 10:17 AM
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I recentley received a free PDA phone from my brokerage. I was wondering if anyone knew if / what amount these sort of things get reported to the IRS as interest. It's compatable only with Verizon, and Verizon sells it for $400 if you don't activate it (I didn't). I turned around and sold the phone for $280. If my brokerage reports it as $400 (or higher, you can get them from PALM for up to $600) would I be able to just report it on my 1040 next spring as what I sold it for (which I feel was its true value). I know that my number will not match up with the the brokerage reports, but I have the auction info saved to back up my claim.

Or am I going to get myself into a hassle thats not worth the $36 in tax savings?

You will likely get a 1099 - I got a 1099 for an account opening gift of a gym bag and some gadgets from my bank last year. You may want to call your brokerage and ask them what value they are declaring, since they probably bought in bulk and did not pay $400 to Verizon. My bank told me up front what value they would declare on the 1099.

If the value they declare is more than the $280, with your documentation of the fair market value based on the auction, you would be able to report the $280. It may bring a question from the IRS, but since you have the documentation, there shouldn't be a problem, other than the hassle of having to answer a question from the IRS.

If they declare less than $280, you are still supposed to report the $280 - the auction showing fair market value works both ways.

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