I have no problem with treating cashback as a rebate.
So, a reality check, Ernie. You have a client that purchases a car that's used in the course of business for $50k, on which they received a $5000 purchase rebate. Is their tax basis for the purposes of calculating depreciation $50K or $45K?
I trust your answer is $45k -- which clearly demonstrates that all rebates are not "tax free".
I'm now stating opinion here, but there's little question in my mind that the tax treatment of a rebate depends upon the associated transaction.
If you're deducting gambling losses against your wins, "rebates" (i.e. cashback) that have reduced cash outflows associated with those losses should be netted against your claimed losses.
- H.
---In vpFREE@yahoogroups.com, <e_mayhorn@...> wrote :
In my practice I treat cash back as a rebate which is tax free. I have spoken to a few auditors about this subject and, after I explain to them what cash back is, have agreed that it should be treated as a rebate, although this was never in an audit specific, just boring tax nerd small talk. With that being said, every audit and auditor is different due to the vagueness of the law. It has never come up in an audit in which I have represented but if it did I would use the rebate theory.
Ernie Mayhorn, EA
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