Thrifty Spending Issue 97: Feature Article

How to Buy Scratch-and-Dent Appliances

Often, you can find great deals on brand-new appliances at scratch-and-dent sales. The trick is first finding a store that sells them, then finding an appliance with flaws that won’t affect your use. Here’s how to do that…

Finding scratch-and-dent appliance stores isn’t that difficult, although it will take a little digging. If you’re still using the Yellow Pages, you can look under “appliances.” You may find a “scratch-and-dent” subsection. Also check under “outlet stores” and “warehouse stores.”

Call the new-appliance outlets listed and ask if they sell scratch-and-dent items, or if they have a clearance center that does. If they do sell them, specify what you’re looking for. Within a minute or two, they’ll tell you if they have anything that matches.

You can also search online. Use the same terms but add the name of your town or the nearest big city. Again, make some calls to see what’s available.

Talk with the salespeople in the stores you visit. Inventory changes all the time. If you let them know what you’re looking for and leave your phone number, you might be surprised what they’ll find for you.

Expect to save 25 to 40 percent, depending on the damage. Many times, the problem will be a tiny dent in a side panel or a scratch in the paint.

Look over any prospective purchase carefully. Check to make sure that all knobs, racks, shelves, etc., are with the appliance. Often, parts are scavenged from a scratch-and-dent unit to put on a pristine-looking one that might be missing a piece and will fetch a higher price.

And remember, just because you found one problem doesn’t mean there aren’t others. The time to find the scratches and dents is while you’re in the store. Ideally, you’ll find something that will be hidden by a wall or cabinet in your kitchen.

Many times, these items are sold “as is.” Make sure the appliance works. Find out what, if any, warranty you get with it.

Don’t hesitate to bargain with the salesperson – especially if the item is last year’s model. The worst that can happen is that they refuse your offer.

Not all scratch-and-dent appliance stores offer delivery. Make sure that you know whether delivery is available, and whether you’ll be charged for it.

Don’t forget to consider other alternatives. Stores that rent or lease furniture and appliances often have used units available for sale. One advantage is that often these appliances still have the balance of their factory warranty available. Call ahead to ask what they have.

Also, many people report good experiences buying from used-appliance centers. Some even offer a six-month or one-year warranty on their appliances.

Naturally, you’ll have a better chance if you don’t need to buy the appliance today for delivery tomorrow. But even if you need it now, it can’t hurt to spend an hour or two looking for a scratch-and-dent appliance bargain. That little bit of effort could save you hundreds or allow you to buy the upgraded appliance you’ve always wanted.

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Thrifty Spending Issue 97: Did you know…

There are three items you should never buy used:

Tires warns that thin tread isn’t the only safety hazard for tires – old and used tires can pose a safety risk. As tires age, they lose elasticity. As a result, the tread could separate from the tire, causing an accident. Even if the tire isn’t that old, it could have been treated poorly. Bottom line – you can’t tell a tire’s condition from the tread alone, so don’t buy a used one just because it looks good.


Software comes with a product code, and most software manufacturers put a limit on the number of times you can reload it. When you buy software used, you have no way of knowing how many times the product code has been used. For example, if the code has a three-time limit and the original owner used it twice, you’ll only be able to load the software onto one more computer before it’s no longer good.


A used mattress can come with a lot of extras you don’t want – dead skin cells, bacteria, hair, and every other gross thing you could imagine. It might also have bed bugs. The bugs are such a growing problem that Terminix has released a Top 15 Cities for Bed Bug Infestation list.

Bed bugs live off human blood, leave itchy bite marks, and can cause skin infections. And they multiply. According to Orkin:

Females can deposit one to five eggs a day, and may lay 200 to 500 eggs in a lifetime. Under normal room temperatures and with an adequate food supply, they can live over 300 days.

Bring a bed bug-infested mattress into your house, and you’ll pay a hefty fee to an exterminator.

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Thrifty Spending Issue 96: Did You Know…

DID YOU KNOW…there are good and bad times to use your car’s a/c in order to optimize your MPG?

Using your car’s air conditioning responsibly could increase your average gas mileage by as much as 20%. On a hot day, driving around town with the windows down feels great and studies show it also saves you precious fuel at speeds of 45 mph and below. But when you hit the highway traveling 55 mph or higher creates enough drag in your vehicle to cause your mileage to suffer. So, be sure to roll those windows up. Next time you need to beat the heat while driving, check the speedometer to be sure you are cruising to savings.


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Thrifty Spending Issue 96: Feature Article

FEATURE ARTICLE:  Debt Forgiveness: Is it truly forgiven or is it transferred to one’s income tax?

Ever settle on a debt and wonder what will happen to the amount that wasn’t paid?

For example, if a credit card debt totaling $30,000 was settled for $7,000, what happens to the remaining $23,000? Is it just forgiven or is it taxable?

Forgiven debt: how it works

In general, if one owes money and it’s eventually written off, as far as Uncle Sam is concerned, the destroyed debt is taxed like income. Using the credit card debt example, since the debt for $23,000 is no longer owed, a 1099-C  will be issued at the end of the year for this amount.

This might not seem fair. After all, it’s not like one received a check for $23,000. The forgiven debt is more like a gift, and gifts aren’t taxable. So why would the IRS treat this forgiven debt as income?

The logic lies in the way income and losses are treated for tax purposes. Basically, it’s yin and yang: One man’s deduction is the other man’s income.

When it comes to business, most transactions involving money are deductible to the one paying it and income to the one receiving it.

For example, if a bank pays interest on a savings account, they get to deduct that money as an expense on their taxes – the account holder, counts it as income. And if the bank lends money to an account holder and that money is not paid back, the bank deducts the bad debt as an expense – and the account holder includes it as income.

In short, the term “debt forgiveness” makes it seem like a gift, but it’s more like “debt deduction.” When one party is writing something off, the opposing party is typically reporting it as income.

That’s the rule and the logic behind debt forgiveness. But as with many rules, especially those relating to income taxes, there are many exceptions.

Exception: insolvency

According to IRS publication 4681, if one is “insolvent,” meaning one owes more than one owns, forgiven debt isn’t counted as income. “Do not include a canceled debt in income to the extent that you were insolvent immediately before the cancellation. You were insolvent immediately before the cancellation to the extent that the total of all of your liabilities was more than the FMV (Fair Market Value) of all of your assets immediately before the cancellation.”

To qualify for this exclusion, you file Form 982. This is generally the form consumers file when they enter into debt settlement agreements and will probably be his best chance at avoiding paying taxes on the forgiven debt.

Exception: bankruptcy

Debt cancelled through a Chapter 7 or Chapter 13 bankruptcy typically isn’t taxable.

Exception: mortgage debt

A foreclosure often includes cancelled mortgage debt – the amount of the mortgage not recouped when the home is taken back and resold.

Since that results in forgiven debt, the result for many hapless homeowners is losing their home, then months later getting a tax form in the mail informing them they owe taxes on potentially hundreds of thousands of dollars of income they never received.

Depending on state laws, the same could be true for those doing a short-sale (selling their home for less than the mortgage balance) or participating in a program offered by a bank, such as Bank of America has offered in the past.

Fortunately Congress rode to the rescue years ago and passed a law called the Mortgage Forgiveness Debt Relief Act of 2007. This law applies to homeowners whose mortgage debt is “partly or entirely forgiven during tax years 2007 through 2012.”

To read the details, check Publication 4681. But in general, if the forgiven mortgage debt was less than $2 million for married couples ($1 million for singles), was secured by a principal residence (as opposed to a rental property or vacation home), and was used to purchase or improve the home (as opposed to buying a car or paying off credit cards), it’s not reportable as income.

Bottom line: seek assistance

These are some common exceptions that could help individuals avoid taxes on forgiven debt. There are also different rules for businesses, as well as for debts that are recourse (those for which one is personally liable) and non-recourse. State laws can also play a part, and so can other laws. For example, after hurricane Katrina, Congress passed a law allowing those in affected areas to exclude forgiven non-business debts from their income that year.

Always weigh all the options on the table before committing to a settlement. Understand the consequences thoroughly and speak to a professional when something is not clear.

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