A bank has given a customer a merchandise gift with a fair market value of $25.00 for opening a deposit account. Which of the following statements describes the proper reporting status of this gift?
A bank has given a customer a merchandise gift with a fair market value of $25.00 for opening a deposit account. Which of the following statements describes the proper reporting status of this gift?
The fair market value of the gift is indeed required to be reported as interest paid and should be included on Form 1099-INT. According to IRS guidelines, if the total value of the gifts provided to a customer during the year is $10 or more, it must be reported as interest income. Since the value of the gift here is $25.00, it meets this criterion and must be reported accordingly.
When a bank gives a customer a gift for opening a deposit account, the fair market value (FMV) of the gift is considered interest and must be reported as such if it meets certain criteria. According to IRS guidelines, if the combined value of all gifts given to a customer during the year is $10 or more (which includes this $25.00 merchandise gift), the value must be reported as interest income. This is reported on Form 1099-INT along with any other interest the customer earns on their deposit account within the tax year.