A while back, I wrote a post about receiving a free HDTV when I opened a new Certificate of Deposit (CD) account at Irwin Union Bank. Specifically, the offer was made to customers who open an 11-month CD with a minimum deposit of $20,000. At the time, the bank informed me that they would report the value of the free gift ($280) to the IRS (on a 1099 form). Since it was clear that a 1099 form would translate into additional income taxes, I knew that the free TV set was not truly free.
The TV itself is a 22 inch Toshiba model 22AV600U. It is the first HDTV that I've owned, and the picture is quite sharp compared to our old tube TVs. The new TV includes a built-in NTSC/ATSC/clear QAM tuner that can tune into both broadcast TV and cable. (It is an unadvertised fact that cable subscribers who have a clear QAM tuner can often receive unencrypted HD cable TV, without adding "digital" cable to their service.)
Anyway, how much did the "free" TV end up costing me? Our Federal marginal tax rate (aka: tax bracket) is 25%, and our California state tax bracket is 9.55%. So, the TV costs is (25% + 9.55%) * $280 = $96.74. It is not a free TV, but that is still a lot less than the retail price for a new 22" HDTV (typically about $250-300).
I deposited $20,000 in the CD for an 11-month term with an interest rate of 1.96% in July 2009. Then in September 2009, Irwin Union Bank was closed by the FDIC with its accounts and assets transferred to First Financial Bank (of Ohio). Subsequent to the Irwin Union Bank closing, the acquiring bank (First Financial) sent me a letter saying that it reduced my CD interested rate to 1.5% for the remainder of my CD's term. Ironically the FDIC says that this is all perfectly legal. However, they would let me withdraw my money from the CD without any early withdrawal penalty. And I would get to keep the free TV, too.
De-Risking But Staying Invested
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