Last year, I bought an RV for $75,000 that turned out to have some cosmetic defects. Since it was determined to be impractical to have them repaired, the manufacturer offered to cut me a $4500 check for the approximate value of the repairs, which I accepted. Part of the money was used to pay down my loan for the RV, while the rest was used for other expenses. I received a 1099-MISC for the check, which severely dropped my tax refund when entered.
Since the check was more of a partial refund and not for compensation of any work I performed, should it not be considered taxable income? My argument is that it shouldn't since in exchange for gaining $4500 cash, I bought something that is now determined to be worth $4500 less than what I paid. If so, how would I go about correcting this?
You're right, the $4,500 is not taxable income, it is a reduction in the amount you paid for the RV. You have several choices for how to handle this:
You're right, the $4,500 is not taxable income, it is a reduction in the amount you paid for the RV. You have several choices for how to handle this: