gnomie

Actually, it is not that difficult to prove. The ability to adjust the value claimed on Form 1099-Misc arose from game show contestants receiving a 1099 for the prizes won and the value would often be the "suggested retail price" or a price far exceeding the actual value, which was especially true if a prize included an airfare and/or hotel component. I had a client who won a trip for two to London for five days and the 1099 stated that the value was in excess of $18,000. We filed the tax return with the $18,000 value, and then discounted it by more $13,000 and provided supplemental documentation with the tax return which included the true cost of the mentioned trip, such as comparable trips offered by other travel companies.

I also had a client who once won a car in the raffle - the 1099 received not only included the sticker price, but attached an additional $2,500 for "fees and services". This was during a period of time when the new car industry was not doing well - I had my client go to two different dealers and get price quotes for the same vehicle and took the average of the two quotes as the true value reported on the tax return.

Over the years, I have probably done a handful of returns where I have adjusted the value stated on Form 1099 - each time I included documentation showing how I calculated the true value and in each case, the tax returns were accepted as filed and no additional correspondence from either the IRS or State taxing authority.

Filing a tax return with an adjusted 1099 value without providing documentation showing the reason for the reduced value with the filing of the tax return are almost guaranteed a letter from your friendly IRS regional office.

With regard to the 1099 from Amex - it is quite easy to claim that the true value according to Amex is .5 cent per point - just include documentation that if one wanted to redeem the points earned for an Amex gift card, the cost would be .5 cent per point. This is actually the best type of documentation - obtaining a lower value from the issuer of the 1099. However, since it seems that most people have received a 1099 in the $600 range, reducing the value by 50% may make little difference in the overall tax liability, depending on the tax bracket.