Over Valued Prize

[Hanover Jim]

Client won a customized car. Received 1099 Misc with a $50K value indicated for this prize. He knew that it was not worth this amount. Had no need to keep the car so they sold it and were only able to get $28K. How would you handle this? Would/could this be a Sched transaction?; with $50K reported as Line 21 other income and Schedule D showing a $22 loss on the sale. I want the net result to be the amount ($28K) that they actually netted on this car.

[Pacun]

Client won a customized car. Received 1099 Misc with a $50K value indicated for this prize. He knew that it was not worth this amount. Had no need to keep the car so they sold it and were only able to get $28K. How would you handle this? Would/could this be a Sched transaction?; with $50K reported as Line 21 other income and Schedule D showing a $22 loss on the sale. I want the net result to be the amount ($28K) that they actually netted on this car.

Personal loss. No deduction.

[Diane]

I did this one year with a client who won a boat. The 1099 was way over valued. He sold the boat right away; did not use it. I put the 1099 on Line 21, then added a subtraction indicating that the Fair Market Value was less than reported on the 1099. It went through with no problem. I think the hitch here is selling it right away.

Diane

[kcjenkins]

Jim, you can not use the D because it is not deductible as a 'loss'. But you can put the 1099 on Line 21, then down at the bottom, in the blue lines, just put a simple explanation like 'reduction in reported value of prize based on actual sale' and put the difference in as a negative. I've done that several times and never had a problem with it. Keep copies of the sales docs in your files, and you will probably never be asked to see them.

[jainen]

>>the amount ($28K) that they actually netted on this car<<

Sorry, I don't agree. He won a brand new car from a dealer, and sold a pre-owned car from a private party. A 44% drop in value is realistic in such a transaction. Unless he can document that dealers are selling for less, he is stuck with paying taxes on MSRP. If he didn't like the deal, he shouldn't have taken it.

[GeneInAlabama]

The car may have been a brand new car given by a dealer, but the original post doesn't say that. It says that it was a "customized" car which might have been an antique car. The value may have been inflated by the one that gave the car in order to gain a tax advantage.