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Subject:  Re: how to report gift certificate sales Date:  1/8/2002  10:42 AM
Author:  cjbb Number:  56911 of 129252

Hi jkalis:

My wife is a massage therapist and her business is an S-Corp. She sold a bunch of gift certificates before Christmas that won't be redeamed until sometime this year. What is the best way to handle the sales in 2001 and the redemption is 2002?

What I forgot to mention is that she has independent contractors renting space in her office. Almost all the gift certificate redemptions will be done by those contractors. How does she avoid paying income tax on the gift certificate sales when she is just going to turn around and pay the money out to another therapist and just collect a smaller amount in rent?

If the S-Corp is cash basis then the gift certificate money is still income when received (as previously posted). The amounts paid to the independent contractors when services are later provided are deducted in the year paid and included on the contractor's 1099. Hence "cash basis".

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