Rev. Rul. 80-61

1980-1 C.B. 287, 1980-9 I.R.B. 18.

                       Internal Revenue Service
                                 Revenue Ruling

                   INFORMATION RETURNS; FINANCIAL INSTITUTION

                            Published: March 3, 1980

26 CFR 1.6041-1: Return of information as to payments of $600 or more.

  Information returns; financial institutions. A financial institution gives merchandise to an individual for inducing another person to make a time deposit. If the fair market value of the merchandise given to an individual during the calendar year is $600 or more, the institution is required to file information returns, Forms 1096 and 1099.

ISSUE

  Must a financial institution that gives merchandise to an individual for inducing another person to make a time deposit in the financial institution file information returns, Forms 1096 and 1099, reporting the fair market value of the merchandise given to

the individual?

FACTS

  A financial institution initiated a promotional campaign to obtain time deposit accounts.  The financial institution gives merchandise with a value of $100 to $800 to any individual, not an employee, who induces another person to deposit a sum of money in a time deposit account.  The value of the merchandise received depends on the amount of money deposited in the account.  The fair market value of the merchandise received is includible in the individual's gross income under section 61 of the Internal Revenue Code.

LAW AND ANALYSIS

  Section 6041(a) of the Code requires that all persons engaged in a trade or business and making payment in the course of such trade or business to another person of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits and income, of $600 or more in any taxable year, shall render a true and accurate return in such form and manner and to such extent as may be prescribed by the regulations.

  Section 1.6041-1(a)(2) of the Income Tax Regulations provides that the return required by section 6041(a) of the Code shall be made on Forms 1096 and 1099.

  Section 1.6041-1(c) of the regulations defines 'fixed or determinable income.'  Income is fixed when it is paid in amounts definitely predetermined. Income is determinable whenever there is a basis of calculation by which the amount to be paid may be ascertained.

  The fair market value of the merchandise received by the taxpayer is determinable income within the meaning of section 1.6041-1(c) of the regulations.

HOLDING

  The financial institution is required to file Forms 1096 and 1099 if, during the calendar year, the fair market value of the merchandise given to an individual is $600 or more.

Rev. Rul. 80-61, 1980-1 C.B. 287, 1980-9 I.R.B. 18.