[BobC]

Originally Posted by Peter_Spaeth

It doesn't seem to be a gift, I agree. But is there a difference between a gift and a contractual transfer for no value, I don't know.

Anyhow, despite what the all too predictable defender says it seems to me a shitty thing to do, to reward yourself because you failed to sell someone's card for them. Hey dude, I couldn't sell your card so I'm just gonna keep it. To me that's a WTF. Even if it is "absolute junk."

Of course that characterization assumes all that matters is dollar value. Explains much.

Peter,

I'm with you. Why don't they just turn the item away as a consignment and simply tell the owner they don't think it will sell for their required minimum. Or here's a novel idea I already mentioned in an earlier post, why don't they tell the owner we'll sell it, but only if you let us combine it with another card(s) in the same lot so we pretty much know it will get the minimum bid, because we don't want to just take your card(s) for nothing.

We all know the old cliche' about how most people always think/feel that something they own is worth more than it actually is. Now if PWCC advised consignors about combining cards in lots to better the chances the lot would at least sell for the minimum, and they declined because they thought their card(s) would sell for more, then I don't think anyone would have as much of an issue with PWCC taking the card(s) by forfeiture.

Now as to your question of a gift versus a transfer for no supposed value, I believe there is a difference. A gift however is usually from one person to another, not from one person to an entirely unrelated for-profit business. So I apologize for my probable innaccurate use of that term in this case, and am pretty confident this could not be construed as a gift. Now as far as the transfer for no value, I know with your background that you are well aware that a transaction/contract/agreement cannot be considered valid and enforceable without both sides having given something of value to complete their part of such an agreement. And for the benefit of others reading this that have no clue what Peter and I are talking about, that is why when you look at some agreements or contracts they will often say something like "For the sum of $10 and.......". This is because there has to be some recognized value or compensation given by both parties/sides to the other for such a contract or agreement to be legallly recognized and enforceable. Doesn't mean the compensation has to be fair and equitable, just that both sides gave something for it to be legal and enforceable.

In this case, the person forfeiting their card is clearly giving up their card, so they would have satisfied their side of the agreement. But what did PWCC give up as compensation for their side of this agreement, and for the forfeiture of this card to be legally enforceable? Even though the seller got nothing paid to them directly for the unsuccessful sale of their card, I'm assuming that it is somehow implied (or maybe even explicitly written and spelled out) in PWCC's consignment agreement that they are owed a commission/fee for their work in listing and selling every item in one of their auctions, even those that receive no bids and aren't sold. And I'm further assuming that in the case of those items that don't get a bid and sell, the consignment agreement somehow states the card(s) that didn't sell are simply taken over by (forfeited to) PWCC to satisy their commissions/fees in lieu of them actually billing the unsuccessful consignor on their cards that didn't sell, and having the consignor then pay those commissions/fees to PWCC, or deduct them from the net proceeds of other cards the consignor may have sold in the same auction.

As already stated above, I've never consigned or sold anything with PWCC so, these are only assumptions on my part as to what they are actually doing, and maybe why. I also don't know if PWCC has stated anywhere in their agreements and paperwork if they have a defined mininum commission/fee they charge for trying to sell an item for someone. If so, would be nice to learn what it is.

Now in an earlier post I also mentioned about some possible tax consequences from this card forfeiture provision. From the standpoint of the consignor/seller, their card is gone and technically sold for I'm assuming whatever their commission/fee was. But since the commission/fee being paid is also a deductible transaction/sales cost to them, they effectively sold it for $0, and depending on other factors, would still technically have a loss equal to their tax basis in the card. Whether they can actually deduct such a loss on their tax return though is then dependent on each individual seller's facts and circumstances.

As for PWCC, I don't know how they record these forfeiture transactions on their books, or how they then subsequently treat them for tax purposes. I believe the correct way to record and report these forfeiture transactions would be to record them as commission/fee income on their books, equal to either the FMV of the forfeited card(s) or their defined minimum commission/fee, whichever is greater. Then the forfeited card(s) would be included as part of their own card inventory, with a cost basis of whatever they recorded as a commission/fee for the card(s). So when they went to finally sell the card(s), they would report 100% of the sales price as part of their ordinary gross taxable sales income, net of any applicable and allowable operating, carrying, sales, or transaction costs incurred. The important thing here I believe is that they initially are reporting the FMV (or at least the minimum defined commission/fee amount) of the card(s) received via forfeitures as ordinary taxable income on their books. By doing so they recognize and record the compensation they were to give on their side of the original assignment agreement, and thereby make the forfeiture transaction legal and enforceable.

If, for whatever reason, PWCC chose not to immediately recognize commission/fee income when they acquired a card(s) through forfeiture because no actual cash changed hands at the time, they could instead just retain and record the card(s) as part of their inventory, but with a $0 cost basis. And then whenever they sold the card(s), they would still pick up all the sales proceeds as gross ordinary taxable income. The advantage could be the deferral of taxable income by not picking up the commission/fee income immediately when the card(s) was originally forfeited, but finally picking up the income and reporting it maybe not till years later when the card(s) is actually sold.

The thing is, I don't believe the IRS would agree with the idea of deferring all the income from forfeited cards to a possibly much later year of sale. And by not reporting anything on their books income-wise when they originally took possession of the card(s) by forfeiture, I think a good attorney could then argue that by their own actions, PWCC was effectively saying they didn't give anything of value to someone who ended up forfeiting a card to them, and therefore render the consignment agreement effectively null and unenforceable. Would at least be interesting to hear and watch that fight.