I referred some people to my apartment complex and they gave me a referral bonus for it. They did not mail me a check, though. They just told me to pay less on my rent. They are claiming that the bonus is taxable income. Are they correct? Does this qualify as a rebate, which isn't taxable since they are discounting my rent? Thanks.
It's not really a tax free rebate because you perform services in exchange for compensation. But if you have to live in the complex to get the referral bonus, it seems to me that you should not be taxed on it. To me it looks like section 119 lodging furnished for the convenience of the employer. And for that it would not be taxable. Stu
The code views this as you doing work for something, and the value of that something being taxable. Unless, of course, there's something else in the code that says otherwise for this specific situation. I doubt it, but I could always be wrong.
Nope. You would have nothing had you not made the referral, so anything you get, whether money, bacon, or rental reduction, is income. Happy Holiday ChEAr$, Harlan Lunsford, EA n LA
It's earned income, but he did not receive it. So his landlord says "pay less rent" and then expenses the amount?
It strikes me as double clutching by the landlord! He reduces his income and then expenses the rebate.
Dick
Aww now, Stu. He didn't say he was an employee of the apartment owner; only that he had referred new renters to the landlord. Hence sec 119 doesn't apply. Holiday ChEAr$, Harlan Lunsford, EA n LA
??? How does the landlord get to be the tenant's employer?
"Harlan Lunsford" wrote
Dang it all!!!
I was counting on the "Free Bacon" lure to attract new clients. I mean, who isn't moved by the slogan "Git'er done for Bacon" and *not* come in for tax preparation? Now I have to asterisk it with "*subject to applicable taxes".
-- Paul A. Thomas, CPA Athens, Georgia
Well, if you take the word "employee" literally as a legal employee as opposed to an independent contractor I'd have to agree with you. But is that necessarily the case? Let's say a landlord gives a plumber free rent in exchange for living on the premises, being available after hours and giving a certain amount of plumbing services. The plumber is clearly an independent contractor. But would §119 apply? Stu
hmm good idea! hah sure there's some section regarding this situation
Well, the landlord wants new tenants. A current tenant finds new tenants and gets compensated for that. More independent contractor than employee, of course, but I was using the term loosely.
Stu
Too loose, I think . Sec. 119 refers ONLY to employer/employee relationships. I don't see any way you could argue that the tenant is the landlord's employee in this situation. Will he get a W-2? I don't think so. I think it's taxable "other income." He's not an independent contractor either, in the sense of having a business of referring tenants to his landlord. It's just an item of incidental income. I also think it wouldn't occur to many people to tell their tax preparer about it unless the landlord gave them a 1099. Katie in San Diego
Yep! (grin
Anyway, let's get a tad more technical here. The referrer (tenant getting the free rent) reports the income even without a 1099 but since this is not a trade or business, pays no SE tax on it. Santa ChEAr$, Harlan Lunsford, EA n LA
LOL! I substituted "bacon" for "eggs", mostly because of the saying "bringing home the bacon". However my grandparents did used to accept eggs, chickens, bacon at their country store. sigh.... Merry Christmas, Paul, from Southwest Georgia.
Santa ChEAr$, Harlan Lunsford, EA n LA
Y'all Southerners are crackin' me up! Speaking of the south, has the moderator moved to Australia yet?
-Mark Bole (Midwest transplant to West Coast)
Moderator: I am still working on it.
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