July 13, 2010
Authored by: Erika Labelle
The IRS recently decided, in PLR 201027015, that a taxpayer who directs her credit card “rebates” to a charitable organization is not required to include the amount in gross income and is entitled to a charitable deduction.
The facts are simple: taxpayers make purchases using their credit cards and as a result of the purchases, they earn “rebates.” These rebates equal 1% of the taxpayer’s purchases, and the taxpayer can either receive cash back or direct the cash to a charitable organization. The IRS holds that these rebates are not includable in the taxpayer’s gross income becase these “rebates” are adjustments to the purchase price paid for the item. The problem is: what item?? Presumably the taxpayer purchased several items from several different retailers. These facts are clearly different from the cell phone company who charges “$50” for my phone by making me pay $200 up front and requiring me to