Today TaxMama hears from Alice in the TaxQuips Forum, who tells us, “An artist lent his artwork for display in the premises. The art piece was lost or destroyed and the artist was paid as a result. Does that require a 1099 form to be issued?”
Kris Hix, the Tax Lady, replies to Alice.
Kris says if the place that displayed the work paid him directly, then yes, the 1099-MISC must be issued. It is no different than going into a retail shop and breaking items and having to pay for the same. The inventory is gone, and payment was rendered – income to the retail establishment, lesson learned by mother with child!
Kris suggests the store might be able to get a reimbursement if they contact their insurance company. That’s a good idea!
TaxMama adds, that essentially, in situations like this, the artist has a sale. The store has bought the work of art – even if they don’t get to enjoy the benefits.
The real question here is, is it a sale of a service, or a sale of a tangible asset – a “thing”?
If the work of art is a tangible asset, which it is – there is no need for a 1099-MISC to be issued. At least not this year. In 2012, we will be required to issue 1099s for everything under the sun. At present, however, we are only required to issue 1099s for rents and services.
So, now that I think about it…I don’t think it’s necessary to issue a 1099. If you want to be safe, do issue it. Put the payment in the “other” box.
And remember, you can find answers to all kinds of questions about paying artists and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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