1099 for not-really-income

There are a number of "affiliate" plans on the net, where somebody gets a cut for selling stuff (by using an affiliate link). The companies that offer them send 1099s for the money sent. Most people who have such accounts use them for their own purchases as well as providing them to others, so the money received is partly from their own purchases (which should be considered a discount, right?) and partly from sales to others (taxable income).

(Comparable situations: (1) I buy widgets for $20 each, sell them for $25. I keep a bunch of widgets for myself; my taxable income is $5 per widget I sell (say, 50, total $250), and the widgets I bought for myself at $20 (another 50) aren't counted. (2) I have an affiliate link for widget-buyers that gets me $5/widget. Other people buy 50 widgets through that link, and I buy 50. I get a 1099 for $500.)

I would assume that the part of the payment for purchases made by the taxpayer isn't taxable; how is this shown on the 1040? In some cases, the purpose of the affiliate signup is entirely to get his own purchases cheaper, so there's no business involved, and no Schedule C.

Seth

Reply to
Seth
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My thinking is that the full $500 is taxable. It's like buying something from your own company -- no different than someone else buying from your company. My advice is to negotiate fringe benefits with the company beforehand.

Reply to
removeps-groups

If the company works the usual way (company buys stuff, sells at a profit), then stuff the owner takes is at cost: line 36 of Schedule C specifically indicates that.

In general, rebates received on your own purchases reduce the cost of those purchases, and aren't taxable unless the cost was deducted, or the rebate reduces the cost below $0 (in which case that part of the rebate is taxable).

Seth

Reply to
Seth

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