Tax News Archive:

Tax Treatment of Non-Cash Inducement by Financial Institutions

For a while now, the IRS has been trying to regulate "de minimis premium", a non-cash inducement that financial institutions like banks use to lure new customers and reward the old ones. A lot of the times there were valid questions raised as to the validity of the information provided by these institutions about the inducements they were offering customers and what kind of tax treatment they should receive.

On June 27th, 2000 the IRS introduced a new procedure under which a financial institution like a bank cannot offer a gift whose value exceeds $10 to either open a new account or add to an old one on deposits under $5000. The limit for deposits over $5000, on a gift is $20. This procedure is effective after Dec. 31st, 1999 for all de minimis premiums.