From TM Forum "Winner From North America For First Referral Program Turned Down P90D"

[donv]

I wish this forum would quit deleting posts, or the content of posts.

 

[tomas]

The crux was that the trade-in value set by Tesla was relatively low, thus inflating the value of the prize and the income taxes due - to such an extent that accepting the prize was not a no brainer.

No, this is the crux of the confusion. Here are some facts:

1) Tesla does not file your taxes, you do. They just issue you (cc: the IRS) a 1099 to the winner indicating the "value" of the winnings. If Tesla calculated 1099 that based upon low trade-in value, the winner would have the prerogative of filing taxes with a different amount than that on the 1099 with an explanation, as long as they had a basis for their new valuation. That basis would be easy, using CPO prices.

2) Nobody can pay your taxes for you. The only way Tesla could give the "winner" a free car is to "net up" the winnings to cover tax implication, which usually means adding about 65% to the prize. Why? Well, if someone gives you $10 and you owe $4 tax on it, they could give you $14... but now you owe $5.60. So, they could give you $15.60... but now you owe $6.22... etc.

My guess: either Tesla recognized the former and provided a 1099 with more "reasonable" trade in value, plus informed winner that they would also get $7500 EV tax credit (really no change to reality, just clearer communication), or Tesla decided to change the stated contest in the winner's favor and net up the difference with enough cash to cover the tax liability created by the trade.

I guess we will never know... but I find three things disturbing about this episode. a) people go running to forums rather than trying to understand it and work out with Tesla, b) a bunch of others jump on assuming the worst about Tesla, c) then people start boasting that "hey we really got this done because of the forum". We will never know if there's even a grain of truth to that. I guess that's how it works in the age of social media. Sigh.

 

[bonnie]

I wish this forum would quit deleting posts, or the content of posts.

It was requested by the OP - are you saying you'd like the mods NOT to honor requests from forum members?

 

[MorrisonHiker]

1) Tesla does not file your taxes, you do. They just issue you (cc: the IRS) a 1099 to the winner indicating the "value" of the winnings. If Tesla calculated 1099 that based upon low trade-in value, the winner would have the prerogative of filing taxes with a different amount than that on the 1099 with an explanation, as long as they had a basis for their new valuation. That basis would be easy, using CPO prices.

Good point. I won a large flat-screen TV from NewEgg several years ago. When I got the 1099, they claimed the value was $2500. I saw that at the time it was shipped to me, it was available for half that price on NewEgg's site so I reported that as the actual value when I filed my taxes.

 

[HankLloydRight]

The crux was that the trade-in value set by Tesla was relatively low, thus inflating the value of the prize and the income taxes due - to such an extent that accepting the prize was not a no brainer.

That was only part of the confusion.

The prize was trading up his existing car to a P90DL.

The initial confusion was that the winner had mistakenly assumed that Tesla was going to buy-back his car AND give him a P90DL for free. That was not the prize (a new car), the prize was a trade. So he was surprised when he wasn't getting renumerated for trading in his car, and it was instead applied against the value of the new car (which is a trade). This resulted in a much larger cost (after taxes) to the winner then he expected.

 

[DiamondDave]

2) Nobody can pay your taxes for you. The only way Tesla could give the "winner" a free car is to "net up" the winnings to cover tax implication, which usually means adding about 65% to the prize. Why? Well, if someone gives you $10 and you owe $4 tax on it, they could give you $14... but now you owe $5.60. So, they could give you $15.60... but now you owe $16.22... etc.

In your example with a 40% tax rate ($4 tax on $10 winnings), netting up the prize to include taxes would add 66.7% (40% of $16.67 is $6.67, leaving $10 after taxes). No need for iterations. Different tax rates, of course, yield different results. A 35% tax rate require the prize to be "netted up" by 53.8%. Your 65% estimate is pretty close for general purposes.

As far as the contest, I'd love to trade for a P90D even if I have to pay tax on the net value of the trade!

 

[AWDtsla]

Does anyone remember when Oprah gave away cars to an entire audience and there was a uproar when those people found out they had to pay taxes?

Deja Vu..

In any case the OP could have taken the car and sold it immediately for a profit, but still paying income tax as required.

- - - Updated - - -

2) Nobody can pay your taxes for you. The only way Tesla could give the "winner" a free car is to "net up" the winnings to cover tax implication, which usually means adding about 65% to the prize. Why? Well, if someone gives you $10 and you owe $4 tax on it, they could give you $14... but now you owe $5.60. So, they could give you $15.60... but now you owe $6.22... etc.

This is wrong. Let's say they give you a $150k item, but don't want you to pay taxes on it. At 40% your tax obligation is $60k. To cover that tax obligation, then need to give you 60k after taxes, so a cash prize of $100k in addition to your $150k car. You pay nothing out of pocket.

 

[ohmman]

In any case the OP could have taken the car and sold it immediately for a profit, but still paying income tax as required.

Actually, I don't think the math supports this action. He would have lost his car in the process, owed $30k in taxes, sold the vehicle at below 'new' pricing (recouping the 30k for taxes and money for a replacement 70D), but would have had to buy a used 70D if he wanted to pocket anything at all. And he'd be stuck with someone else's 70D instead of his own.

 

[ChadFeldheimer]

That basis would be easy, using CPO prices.

Except that the winner did not have a CPO car and was not selling at retail?

- - - Updated - - -

That was only part of the confusion.

The prize was trading up his existing car to a P90DL.

It was clear (to me) that this part was never confused. The winner had calculated 30k owed in income taxes, and added that cost to the price he had paid for his 70D (several months back) to arrive at a total outlay that was within spitting distance of a new P90DL. When he ordered his 70D, he had decided that a P90DL was not worth the additional expense. He arrived at the same conclusion after calculating his cost to accept his prize - and so had decided to decline his prize.

 

[S'toon]

I'm totally confused to what happened, other than the winner was told he or she had to pay $30K in taxes. Since they probably couldn't afford it, otherwise they'd have bought a P90DL instead of a 70D, they turned it down. I don't blame them one bit.

 

[apacheguy]

"What’s more, we’ve added an additional reward: the customer who makes the most referrals by the end of October will be invited to swap their current Model S for a fully loaded Ludicrous P90D Model S, for free. All other terms of the program remain unchanged."

Hmm. Has that text been there since the beginning? I never closely read the terms of the referral program, but I was never under the impression that a vehicle swap was necessary. At least not from reading posts here on TMC or reading articles in the media.

 

[bonnie]

Hmm. Has that text been there since the beginning? I never closely read the terms of the referral program, but I was never under the impression that a vehicle swap was necessary. At least not from reading posts here on TMC or reading articles in the media.

When it was added as a prize (same time as Powerwalls), it was a swap. Here's a screenshot taken on Oct 9th:

View attachment 104579

Let's not forget the OP has also qualified for a free Powerwall w/installation & also the right to purchase a discounted Founders, in addition to this swap. Oh, and invites to the Gigafactory party. He's done okay ...

 

[HankLloydRight]

It was clear (to me) that this part was never confused. The winner had calculated 30k owed in income taxes, and added that cost to the price he had paid for his 70D (several months back) to arrive at a total outlay that was within spitting distance of a new P90DL. When he ordered his 70D, he had decided that a P90DL was not worth the additional expense. He arrived at the same conclusion after calculating his cost to accept his prize - and so had decided to decline his prize.

That was *after* Tesla told him they weren't buying his car outright for $72k and that he was trading it "up" not trading it "in". There's a big difference. See my detailed explaination post here: From TM Forum - Page 4

He says originally (bolding mine): " I was made to understand that a swap meant that I would be trading in my 70D, for which I would receive the proceeds, than be given a P90DL,"

He was never going to receive the proceeds.

 

[ohmman]

Let's not forget the OP has also qualified for a free Powerwall w/installation & also the right to purchase a discounted Founders, in addition to this swap. Oh, and invites to the Gigafactory party. He's done okay ...

I did forget this. In fact, my understanding was that those were discrete prizes. Very cool. Heck, I'd do it just for the factory tour.

 

[freeewilly]

I'm totally confused to what happened, other than the winner was told he or she had to pay $30K in taxes. Since they probably couldn't afford it, otherwise they'd have bought a P90DL instead of a 70D, they turned it down. I don't blame them one bit.

It's kind of harsh to say the winner can't afford a P90DL. He bought a nicely equipped 70D worth over $100,000.

 

[HankLloydRight]

It's kind of harsh to say the winner can't afford a P90DL. He bought a nicely equipped 70D worth over $100,000.

I don't think anyone should be saying anything about what someone can or can't afford. Only he lives his life and can make those calls, nobody else. Just because he bought what he bought doesn't mean he could have spent 40%-50% more for something else. For some people, the Model S is a huge stretch, take out loans, and they're super-lucky to get one, and for others, it's a drop in the bucket and upgrade to the next best thing at every turn. And a lot of people between those extremes.

 

[qwk]

Tesla sucks at any kind of business decision, even no brainer ones. This is nothing new. What's worse is that they do not learn from these mistakes.

 

[ChadFeldheimer]

That was *after* Tesla told him they weren't buying his car outright for $72k and that he was trading it "up" not trading it "in". There's a big difference. See my detailed explaination post here: From TM Forum - Page 4

He says originally (bolding mine): " I was made to understand that a swap meant that I would be trading in my 70D, for which I would receive the proceeds, than be given a P90DL,"

He was never going to receive the proceeds.

Sure. But that confusion was just the backstory, and it was settled prior to the prizewinner rationally deciding to decline the prize (and us learning about it).

The crux of the matter was that the prize turned out to be not much of a prize... and now presumably is a prize again

 

[AnOutsider]

I wish this forum would quit deleting posts, or the content of posts.

It was requested by the OP - are you saying you'd like the mods NOT to honor requests from forum members?

View attachment 104542

Actually the OP deleted the post on his own and disrupted the rest of the thread in the process because folks had no first post to go on. And folks wonder why there's now a time limit on edits.

 

[HankLloydRight]

Sure. But that confusion was just the backstory, and it was settled prior to the prizewinner rationally deciding to decline the prize (and us learning about it).

Sorry to belabor the point, but he declined the prize because his net out of pocket cost ($30k) was way more than what he expected it to be ($0k).