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I've seen FMV defined as the difference between the pre-DP coverage election and the post-DP coverage election. That could be single/two person, single/family (if kids are involved). The IRS has been silent, but I think we're headed for a fall.

Here's my argument: Let's say I drive a Buick worth $30,000 and you drive a Cadillac worth $50,000. You give me your Cadillac to drive and I wreck it. I offer you Fair Market Value. You agree, and I give you a check for $20,000. Are you happy, or were you expecting a check for $50,000?

Another point: What if Pre-DP and Post-DP status are the same? I had a case like this. Both DPs came to the relationship with children, so both were in family status (two-tier plans). If there's no difference in cost, is the FMV defensibly zero? I don't think the IRS would think so.

In my mind, the IRS is looking to impute income on the value of the benefit that the person is now receiving by virtue of being a domestic partner. The "difference" scenario doesn't make this happen.

Thoughts? Thanks!

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I've seen FMV defined as the difference between the pre-DP coverage election and the post-DP coverage election. That could be single/two person, single/family (if kids are involved). The IRS has been silent, but I think we're headed for a fall.

Here's my argument: Let's say I drive a Buick worth $30,000 and you drive a Cadillac worth $50,000. You give me your Cadillac to drive and I wreck it. I offer you Fair Market Value. You agree, and I give you a check for $20,000. Are you happy, or were you expecting a check for $50,000?

Another point: What if Pre-DP and Post-DP status are the same? I had a case like this. Both DPs came to the relationship with children, so both were in family status (two-tier plans). If there's no difference in cost, is the FMV defensibly zero? I don't think the IRS would think so.

In my mind, the IRS is looking to impute income on the value of the benefit that the person is now receiving by virtue of being a domestic partner. The "difference" scenario doesn't make this happen.

Thoughts? Thanks!

I don't have a cite handy for this, but I've read that the FMV is the single COBRA cost of the coverage. For a domestic partner situation this maybe almost the same as the difference between single and 2 person coverage. But several states (MA, MN, CT and IA are the ones I am aware of ) are now mandating coverage for overage dependents. We need to figure out the FMV value of coverage for an overage child when the employee already has family coverage and there was no incremental cost for this dependent. We are planning to use the single COBRA cost.

edited to add : see last paragraph in this article

http://www.davisbrownlaw.com/documents/new...4E653C6AB0B.pdf

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