Originally Posted by
dhuey
The article from my link two posts up goes over how to do a Schedule B (interest) adjustment to lower the reported FMV of the miles. However, recall that Citi inexplicably issued 1099-MISCs, claiming these miles are a prize or award. That compounds the mess Citi made for its account-holders.
This should have been reported as interest on a 1099-INT. A "prize or award" could be a lot of things, but it can't be something anyone can get as a bonus for opening an account. I looked at the statute, the reg and summaries of cases involving prizes and awards, and every time the prize or award involved some sort of random drawing or accolade for the taxpayer. In other words, someone was either lucky or special -- never simply signed up for a deal available to anyone.
I would rather have a 1099-MISC than a 1099-INT. The FMV adjustment for a 1099-MISC is easily done on line 21 (Other Income) where the 1099-MISC is entered.
I made the following post previously which describes exactly how to take the FMV adjustment for the 1099-MISC.
"Intuit tax programs (I am using ProSeries) treat it this way. The 1099-MISC amount is entered on line 21 (Other Income) of form 1040 But if you want to do a FMV adjustment you double click (very technical term) on line 21 which opens up the Other Income Form for line 21. On line 3b of that form the amount from line 3 of the 1099-MISC is entered. Line 17 of the form is for Other Taxable Income and is where the FMV adjustment (a negative value) is made). I would suggest something such as "FMV adjustment for American Airlines miles received from Citibank".
As an example it your 1099-MISC had $1000 in box 3 that would be entered on the Other Income Form in box 3b. A FMV adjustment of -$600 would be entered on line 17 (just using $600 as an example).
When the return is printed for filing the 1040 indicates $400 (1000-600) on line 21 (Other Income). It also prints out "SEE STATEMENT L21" to the left of line 21. This Other Income Form prints out as part of the filing copy and is an integral part of the tax return.
This is information that may only be of interest to those preparing their own returns."