Question - I helped a friend over the course of several weeks install multiple PCs and wireless network in his house. Although employed in the field by a large computer manufacturer, this isn't something I do at work or even on the side (i.e.: I am not a contractor/consultant or even do this normally as a side). My neighbor insisted on compensating me, but I refused actual cash. However, he owns a beer and wine store, and one day I see several cases of beer sitting outside my house with a thank you card attached. Value I would guess is about $50 (it's good beer!).
So I can't return them.
Curious where and how would one report this 'income' on my t/y
Technically speaking, it is income since it is compensation for work performed. (You can rationalize all you want. It is not a gift.) Practically speaking, who are you - Felix Unger? (For those of you too young to remember - Felix Unger was a character on the Odd Couple who once reported the 25 cents he found on the sidewalk as income on his tax return. And yes, if you find 25 cents on the sidewalk it is income.) $50????? When you start getting paid thousand of dollars in beer and wine come talk to us. Better yet, if it is good beer and wine, we will come talk to you. Bert Harrison
Suppose instead of beer, the neighbor had volunteered to fix a persistent leak in the recipient's toilet? or other small services to his house? IRS position on this is that it's only swapping favors, non taxable to either. it's an old American tradition dating back to log raising days on the frontier. In this case there was no contract before the services were performed. The gift of beer after the fact is solely a gift and was not dependent on the successful conclusion of the service. What if the fellow had not been successful in installing the computers? (I forget the exact nature of the services by this time.)
Techinicallly speaking the 25 cents is income, but thank God for the 49 cent rule. And Felix Unger was the fellow who always had his tax return typed up and mailed by Dec 31st as I recall. ChEAr$, Harlan Lunsford, EA n LA
As far as the IRS is concerned, and I believe the courts have upheld them in this, if it is "with respect to" services performed", it is compensation. Just like a tip is legally voluntary and based on past consideration but is nevertheless considered taxable income.
On the other hand, since this was an isolated incident and not a lot of money, I'd go with it as a gift in this case.
Can you give me a cite of that? Like I said, you can rationalize all you want and call it what you want. He received property because of services he performed. Technically it is income.
I am shocked and distressed that the Television Media are treating such behavior as acceptable. What Felix and any right-thinking person should have done is turn the found money into the police, wait 30 days (?) to see if the rightful owner claimed it, and THEN receive the money from the police and treated it as income.
As for the 49 cent rule, I'll bet Felix found another 25 cents (cumulatively) during the same tax year.
The simplest of solutions is to declare it as income on your Schedule C and purchase approximately $50 worth of consulting related hardware/software that you need if you were to do similar work again as a Schedule C deduction.
If I see a dime on the sidewalk but _don't_ pick it up, does it still count as income? Constructive Receipt rules might indicate that it is; or is it more like turning down a job? Seth
---------- Moderator: What a way to start a constructive receipt argument!
Moderator: Anyone responding to this post had better snip it big time! Brevity is a virtue. ============================================================
formatting link
Law Dictionary - Glossary of Legal Terms
9 legal terms for gift found. Enter the word you would like to look up:
gift
conveyancing. A voluntary conveyance; that is, a conveyance not founded on the consideration of money or blood. The word denotes rather the motive of the conveyance; so that a feoffment or grant may be called a gift when gratuitous. A gift is of the same nature as a settlement; neither denotes a form of assurance, but the nature of the transaction. Watk. Prin. 199, by Preston. The operative words of this conveyance are do or dedi. The maker of this instrument is called the donor, and he to whom it is made, the donee. 2 B. Com. 316 Litt. 69; Touchs. ch. 11. Source: Bouvier 1856
Print legal term Send this legal term to a friend
gift
contracts. The act by which the owner of a thing, voluntarily transfers the title and possession of the same, from himself to another person who accepts it, without any consideration. It differs from a grant, sale, or barter in this, that in each of these cases there must be a consideration, and a gift, as the definitionstates, must be without consideration.
The manner of making the gift may be in writing, or verbally, and, as far as personal chattels are concerned, they are equally binding. Perk. §57; 2 Bl. Com. 441. But real estate must be transferred by deed.
There must be a transfer made with an intention of passing the title, and delivering the possession of the thing given, and it must be accepted by the donee. 1 Madd. Ch. R. 176, Am. ed. p. 104; sed vide 2 Barn. & Ald. 551; Noy's Rep. 67.
The transfer must be without consideration, for if there be the least consideration, it will change the contract into a sale or barter, if possession be delivered; or if not, into an executory contract. 2 Bl. Com. 440. Law Dictionary - Glossary of Legal Terms
9 legal terms for consideration found. Enter the word you would like to look up:
consideration
"Either some benefit to the promisor or some detriment to the promisee given to influence the making of their contract with each other; may take the form of money, property or services rendered." Source: lawyerintl.com 2005
Print legal term Send this legal term to a friend
formatting link
consideration
contracts. A compensation which is paid, or all inconvenience suffered by the, party from whom it proceeds. Or it is the reason which moves the contracting party to enter into the contract. 2 Bl. Com. 443. Viner defines it to be a cause or occasion meritorious, requiring a mutual recompense in deed or in law. Abr. tit. Consideration, A. A consideration of some sort or other, is so absolutely necessary to the forming a good contract, that a nudum pactum, or an agreement to do or to pay any thing on one side, without any compensation to the other, is totally void in law, and a man cannot be compelled to perform it. Dr. & Stud. d. 2, c. 24 3 Call, R. 439 7 Conn. 57; 1 Stew. R. 51 5 Mass. 301 4 John. R. 235; C. Yerg. 418; Cooke, R. 467; 6 Halst. R. 174; 4 Munf. R. 95. But contracts under seal are valid without a consideration; or, perbaps, more properly speaking, every bond imports in itself a sufficient consideration, though none be mentioned. 11 Serg. & R. 107. Negotiable instruments, as bills of exchange and promissory notes, carry with them prima facie evidence of consideration. 2 Bl. Com. 445.
The consideration must be some benefit to the party by whom the promise is made, or to a third person at his instance; or some detriment sustained at the instance of the party promising, by the party in whose favor the promise is made. 4 East, 455; .1 Taunt. 523 Chitty on Contr. 7 Dr. & Stu. 179; 1 Selw. N. P. 39 , 40; 2 pet. 182 1 Litt. 123; 3 John. 100; 6 Mass. 58 2 Bibb. 30; 2 J. J. Marsh. 222; 5 Cranch, 142, 150 2 N. H. Rep. 97 Wright, It. 660; 14 John. R. 466 13 S. & R. 29 3 M. Gr. & Sc. 321.
Considerations are good, as when they are for natural love and affection; or valuable, when some benefit arises to the party to whom they are made, or inconvenience to the party making them. Vin. Abr. Consideration, B; 5 How. U. S.
They are legal, which are sufficient to support the contract or illegal, which render it void. As to illegal considerations, see 1 Hov. Supp. to Ves. jr. 295; 2 Hov. Supp. to Ves. jr. 448; 2 Burr. 924 1 Bl. Rep. 204. If the, performance be utterly impossible, in fact or in law, the consideration is void. 2 Lev. 161; Yelv. 197, and note; 3 Bos. & Pull. 296, n. 14 Johns. R. 381.
A mere moral obligation to pay a debt or perform a duty, is a sufficient consideration for an express promise, although no legal liability existed at the time of making such promise. Cowp. 290 Bl. Com. 445 3 Bos. & Pull. 249, note; 2 East, 506; 3 Taunt. 311; 5 Taunt. 36; 13 Johns. R.
259; Yelv. 41, b, note; 3 Pick. 207. But it is to be observed, that in such cases there must have been a good or valuable consideration; for example, every one is under a moral obligation to relieve a person in distress, a promise to do so, however, is not binding in law. One is bound to pay a debt which he owes, although he has been released; a promise to pay such a debt is obligatory in law on the debtor, and can therefore be enforeed by action. 12 S. & R.
177; 19 John. R. 147; 4 W. C. C. R. 86, 148; 7 John. R. 26;
14 John. R. 178; 1 Cowen, R. 249; 8 Mass. R. 127. See 7 Conn. R. 57; 1 Verm. R. 420; 5 Verm. R. 173; 5. Ham. R. 58;
3 Penna. R. 172; 5 Binn. R. 33.
In respect of time, a consideration is either, 1st. Executed, or Something done before the making of the obligor's promise. Yelv. 41, a. n. In general, an executed consideration is insufficient to support a contract; 7 John. R. 87; 2 Conn. R. 404; 7 Cowen, R. 358; but an executed consideration on request; 7 John. R. 87 1 Caines R. 584; or by some previous duty, or if the debt be continuing at the time, or it is barred by some rule of law, or some provision of a statute, as the act of limitation, it is sufficient to maintain an action. 4 W. C. C. R. 148 14 John. R. 378 17 S. & R. 126. 2d. Executory, or something to be done after such promise. 3d. Concurrent, as in the case of mutual promises; and, 4th. A continuing consideration. Chitty on Contr. 16.
As to cases where the contract has been set aside on the ground of a total failure of the consideration, see 11 Johns. R. 50; 7 Mass. 14; 8 Johns. R. 458; 8 Mass. 46 6 Cranch, 53; 2 Caines' Rep. 246 and 1 Camp. 40, n. When the consideration turns out to be false and fails, there is no contract; as, for example, if my father by his will gives me all his estate, charged with the payment of a thousand dollars, and I promise to give you my house instead of the legacy to you, and you agree to buy it with the legacy, and before the contract is completed, and I make you a deed for the house, I discover that my father made a codicil to his will and by it be revoked the gift to you' I am not bound to complete the contract by making you a deed for my house. Poth. on Oblig. part 1, c. 1, art. 3, 6. See, in general, Obligation,, New Promise; Bouv. Inst. Index. b. t,; Evans' Poth. vol. ii. p. 19; 1 Fonb. Eq. 335; Newl. Contr. 65; 1 Com. Contr. 26; Fell on Guarrant. 337; 3 Chit. Com. Law, 63 to 99; 3 Bos. & Pull. 249, n; 1 Fonb. Eq. 122, note z; Id.
370, note g; 5 East, 20, n.; 2 Saund. 211, note 2; Lawes Pl. Ass. 49; 1 Com. Dig. Action upon the case upon Assumpsit, B Vin. Abr. Actions of Assumpsit, Q; Id. tit. Consideration. Source: Bouvier 1856
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.