Yes, that's exactly right, I think.
My opinion. Your schedule C should always include the full 1099 ETV amount in the line 1 "Gross Receipts or Sales". Technically, the value in that 1099NEC is in error, and we as Viners should every year write to Amazon requesting they amend the 1099 to reflect a reasonable fair market value, but I think we can assume that Amazon will refuse to do so and might just kick us out of the program for asking for special treatment that could set a precedent, so we can claim intimidation as reason for not doing so. (Amazon could also rightly claim that they cannot estimate to what extent the item will be salable after your 6 months of use and testing, so the ETV is thus the maximum theoretical value and they cannot ever give an accurate 1099.) Instead, it's up to the taxpayer to make adjustments to the inflated ETV numbers in schedule C line 2, "Returns and allowances". The fair value of the payment-in-kind is its reasonable lawn sale value at the end of six months use, test, and possibly destructive testing. It's entirely fair to assert that an item has zero value at the end of the test period. For instance, I order a toy from RFY and my grandson visits me, and I let him play with it. He breaks it. The breaking of the toy is integral to my "business". I then go to my spreadsheet and mark that item's expected used value as being zero. It's full ETV now appears on the allowances line where it is subtracted from the line 1 amount and results in the net income for that item to become zero. (I think this makes more sense than putting its value under cost of goods sold line 42). To do this, good records need to be kept. I don't know how much I've been "paid" until the test and the 6 months are over. My spreadsheet has places to check off whether the item survived testing in usable condition, or it was damaged, destroyed, deemed unsalable, and its disposition: sold (for $xx), retained as personal property, recycled, donated, scrapped, etc. If by chance an item is adjusted to zero but later sold, it needs to have its allowance "recaptured". The logical place for that is line 6, "Other income" with a notation that it is recapture of previous devaluation allowances. If this is done the Viner ends up paying some tax, but no conflicts show up in the forms, and if every single item is documented in this way, to the IRS there is solid evidence that the Viner had a consistent, logical and appropriate accounting method. To my way of thinking, this gives the best possible tax treatment to the Viner, and still results in some desirable tax income for the IRS. There's absolutely no reason to take the ETV stated on the 1099 as your net income if you're willing to do the bookkeeping. The potential savings are worth it. And any choice that results in self employment income, even a small amount, for the IRS, is likely to be satisfactory to their eyes. Opinion?
