Quote:
Originally Posted by Peter_Spaeth
Bob one might look at the forfeiture provision as just one term of an overall contract for which there clearly was consideration on PWCC's part, including PWCC's effort to sell the card. Not sure you would isolate it in asking is it enforceable.
To me it's more an ethical than legal issue and I leave the tax to you. As for less draconian solutions, how about just doing what Scott does, mail the card back? The cost of a few mailers and postage isn't going to break PWCC's bank.
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Peter, see and agree with your point, but also why I'm bringing up the question of internal accounting by a seller. As I said, I think a seller in this set of circumstances should be immediately recording and reporting some commision/fee on their books to recognize the value or compensation of their services, which resulted from the forfeiture of a card. And I'm pretty confident the IRS would say this is the proper way to record such a forfeiture transaction also.
However, maybe the seller doesn't have a minumum stated commission/fee, so they have to look at the value of what they get in return for the fees they would have charged, which in this case would mean that someone would have to take the time and effort to estimate the value of every single card they received by forfeiture. And not just show that as current commision/fee income, but also now list each and every forfeited card as inventory on their books, and keep track of them all going forward.
Now maybe the owner(s) of this seller tells his/her employees not to bother wasting their time keeping track of all that because its not worth the effort. Or maybe the owner(s) feel their business is so big, and the activity involving these forfeitures is so small in comparison, that no one would ever notice they weren't doing something quite right, including the IRS, so he/she says why bother recording any commission/fee income on it now, we'll just wait till we sell the items sometime in the future and recognize the income then. Unless some/all of the forfeited items just happen to disappear out the door one day since no one was keeping track of them on the company's books.
That's the thing with a forfeiture like this. Since the seller isn't writing or depositing a check, or even creating an invoice, there's no mandatory entry they'd have to make on the company books. And since nothing is going through the company's bank account(s), nothing for the IRS to see or catch either. Any forfeited cards could easily just be stuck and left on a shelf somewhere, and after a while maybe no one would know what happened to them.
And though we both agree there was value given by the seller in the form of services rendered for which they should have recognized commission/fee income, how might a judge react if he found out the seller never bothered to record and report the income though? Probably never happen, but I could possibly see a judge voiding a consighment agreement in that case, or not, but then turn the seller over to the IRS. LOL
We'll probably never see anything like that happen though, but it would be fun to follow if it ever did.