Question for a CPA. A few years ago I spoke with my accountant (a CPA) about placement of different Farm Expenses.
My question concerned Security. I have Guard dogs (pets) & quite a lot of expenses. I thought those expenses could be placed under Veterinary, breeding & medicine. I separated all those expenses out & he still placed them into Repairs & maintenance.
So that item has never changed in all the years. So just wondering how another CPA would place items like this.
How are you interpreting that this case says it was NOT income?
This is the sort of thing I was always interested in. I assumed you folks did this, but I donāt really know enough about how to setup something like this. How did it work? Did you have to work directly with the bank to set up this system?
Most blogs that have covered this have misinterpreted the ruling. This line pretty much sums it up:
For his own reasons respondent has
made a conscious choice to avoid the application of
a [*21] rebate analysis to the taxability of the cash
rewards as a reduction of basis. In conclusion, we hold
that the Reward Dollars associated with the Visa gift
card purchases were not properly included in income.
What the court is saying is that ārespondentā (the IRS) was improper when they included the reward dollars associated with VGC purchases in income. For the reward dollars earned from direct purchases of MOs and card loads, they found that the IRS was correct in including them in income.
This becomes exceptionally clear when you read the paragraph that follows:
However, petitionersā direct purchases of money
orders and reloads of cash into the debit cards
using the American Express cards presents a different
question from the purchase of Visa gift cards. The
Visa gift cards have product characteristics. They
provide a consumer service embodied in a simple
plastic card for convenience. The Visa gift cards
are not redeemable for cash, but the money orders
purchased with the American Express cards and the
infusion of cash into the reloadable debit cards are
difficult to reconcile with the IRS credit card reward
policy. No product or service is obtained in these
uses of the American Express cards other than cash
transfers. The money orders are not properly treated as
a product subject to a price adjustment because they
were eligible for deposit into petitionersā bank account
from acquisition. Similarly, the cash infusions to the
reloadable debit cards were not product purchases.
The reloadable debit cards were used for Moneygram
transfers, which are arguably a service. However, the
Reward Dollars in dispute were issued for the cash
infusions, not the transfer fees. Therefore, we uphold
respondentās inclusion in income of the related Reward
[*22] Dollars for the direct purchases of money orders
and the cash infusions to the reloadable debit cards.
As far as automating my bank deposits, that was done without any knowledge or participation on the bankās behalf. A bit of reverse engineering and scripting can go a long way.
This is where you are off base. If the IRS decides to tax credit card rewards, your CD purchases are the low hanging fruit, the really straightforward situation thatāll take very little effort to enforce. This court case has effectively already ruled on your method, while leaving the more complex gift card methods unclear.
Based on this case, the so-called āfull strengthā MSers have a good faith reason to continue excluding rewards from taxable income. Your continued good faith complaince would require claiming to have no knowledge of this court case.
Again, you are banking on not getting caught. Which may work out great for you, since the risk of audit is generally pretty low overall. But dont confuse that with being right.
That isnt judging you, that is judging the claims you are making, so that others do not read them and assume theyāre correct. I dont think anyone here gives two hoots about what you do and do not claim on your taxes, we care that others reading your definitive declarations will walk away misinformed, and make their own decisions unaware of the potential risks theyāre exposing themselves to.
Ah, ok. I misinterpreted what he was doing as identical to what you were doing. Buying āice creamā first and converting that to MOs actually keeps it from becoming taxable income. But buying MOs directly or reloading debit cards that can be cashed out makes it taxable. And you are saying you did the former, not the latter. Correct?
Forgive my ignorance please. I am only aware of remote deposits for individual accounts using a bankās app that takes a picture of the check. Were you able to script the bankās app to somehow automate that whole process INSIDE the app?
Thereās also the fact that the window for them to initiate a claim for back taxes is closing or has already closed for those āglory yearsā. This particular case had dragged on for years. I wouldnt be surprised if we dont hear anything more official on the subject (unless there are other cases already in process), simply because of the countless roadblocks that have been put in place since, severly limiting the potential for 5-figure, let alone 6-figure, gains. Even with the whole concept of āmanufactured spendingā having gone mainstream, the potential spoils for the IRS isnt nearly as lucrative as it was a decade ago.
Given the current ruling, thatās what they decided. The court did imply there are avenues the IRS could take to argue for taxability of the VGC rewards, but also directly told the IRS they should put out guidance instead of litigating randomly.
At the time it was web browser/computer based. Most things are mobile app based these days, which I actually find easier.
If their app can do it, there is (almost) no reason you canāt write your own app to do it.
I received copies of the filings and stipulations. Suffice it to say this guy was an old visitor of FWF, as stated in their pleading. I will post a link to it on the DOC discussion and write a Twitter thread on it once I get a chance to digest the thousands of pages.
Woah. Stamped as in a hardware stamp or image manipulation? What kind of scanner did you use?
Letās be very precise here. From what I understand, the court ruled that IRS was wrong to include Reward Dollars in taxable income. The Reward Dollars earned from purchasing VGCs are not taxable (prolly because VGC can be considered a service), but the depositing of the Money Orders bought with those VGCs or bill payments made with VGCs still (obviously?) result in taxable income. IRS could still pursue that route.
It used ImageMagick to overlay them (so image manipulation). Scanner is a Fujitsu fi-7160. They run about $1000 but worth every penny. Very fast, reliable, and can feed a stack of embossed credit cards right through the sheet feeder.
Very nice. The last piece of the puzzle is finding an institution that would let you deposit so much MO. IIRC even back then it was an issue. Iām guessing you got some kind of a business relationship, perhaps even as part of a real business.
Just a USAA personal account. And my wifeās, and a few of my kids.
Unsurprisingly, eventually our accounts all got closed and weāre no longer able to open any banking or credit products there. I have nothing negative to say about USAA though. We still use their insurance.
Came to an old WSJ report of the same court decision: https://archive.vn/Gd5as
Can I reach these 2 conclusions from my reading?
You do realize that āoldā report was published today? It is literlly 11 hours old. 
The only thing you can conclude is āMaybeā. That case did little to resolve any uncertainty. What it did do is put the uncertainty on record, providing a decent defense against potential criminal tax evasion claims (in other words, not reporting the gains based on this case is a good faith attempt to comply). And it promoted the idea that the IRS should issue clear guidance before going after anyone else.
Oops. I had an impression it was old, because the case was old 
I think itās very clear of my 1st point: āRewards earned on purchases of Visa gift cards arenāt taxable, he ruled, because the cards are productsā.
So I am sure IRS cannot simply tax you because you bought VGC, not any more.
You havenāt been in a fight with the IRS, have you? 
My macadamia nut plantation write offs were perfectly legal, yet the IRS still taxed me (and thousands of others).
Earning rewards by itself is not a taxable event. Buying a VGC was never a taxable event. You could buy the VGCs and give them all away and nobody would have to pay any taxes (except when any gift tax exemptions are exceeded, perhaps). It only becomes taxable when a series of transactions lead to a profit.
As Iāve said before, itās insane to think that the IRS will allow anyone to generate a profit without paying taxes on it.
Itās not insane. But if I may change your word āwillā, above, instead to the words āwill in futureā, then I actually agree with you.
As I highlighted on another thread, there is not at present any history of taxation of MS profits. However that, like everything else, is subject to change. And there is no question, going forward, the IRS could make a case for such taxation. Would there be challenges? I dunno. Probably. But the case is there to be made.
My belief is the IRS has remained aloof from this issue so far owing to practical considerations. Structures would have to be put into place to collect tax on MS profits. It would require a significant enforcement effort. Just the reporting itself would be challenging for the IRS, and new. This because there are billions of credit card transactions each year, most of which are of no interest to the IRS whatsoever. How to separate the wheat from the chaff? Would the existing system of category codes suffice, or would a more sophisticated system need to be in place? or a different system entirely?
So much for the IRS to accomplish to collect this new tax. So little time. 