Do you watch every moment of the Oscars and the red carpet hoopla? Or do you just read who won after? Either way, who’s the biggest winner of them all? The IRS.
Taking home an Academy Award means a recipient will make a lot more money. The money is taxed but not the Oscar itself, even though the gilded statuette may be “priceless.” But free goods you receive for being nominated or attending?
That’s another story, and you will probably receive an IRS 1099 Form reporting the value of what you got! See Watch Your Mail For 1099s. Oscar freebies–swag–changes yearly. All sorts of products benefit from celebs giving them a try.
The expensive goodies can add up. Top celebs getting the best gift bags net six figures worth of free gear. A-listers usually get the most expensive goods–nominees who don’t collect a statue for their mantle don’t go home empty-handed.
Curious? Take a look inside the Oscar swag bag. Distinctive Assets‘ annual Everyone Wins at the Oscars Nominee Gift Bag was designed to soften the blow of not winning. For years the entertainment industry and the IRS locked horns over taxes. See Why Ricky Gervais Sicced IRS on Golden Globes.
But now IRS guidelines are clear. If you get a gift bag, you generally have taxable income equal to its fair market value.
Q: Can’t you argue this was a “gift” and you aren’t being paid?
A: Nope, you lose. You must report it on your tax return.
Q: What about gift certificates or vouchers for trips or personal services?
A: If you redeem the certificates or vouchers you must include the fair market value of the trip or service on your tax return.
Q: If these are gifts, why are they income?
A: They’re not gifts for tax purposes. The organizations and merchants don’t give them solely out of affection or respect.
Q: Can you take a charitable contribution deduction if you “regift” a gift bag?
A: Yes, if you donate the gift bag to a qualified charity. But the fair market value of the gifts must still be reported on your tax return. See Giving To Charity? Great. Staying Off IRS Radar? Priceless.
Q: Are there third-party reporting requirements for gift bags?
Q: What if you make selections in a free shopping room for participating in the show?
A: The value of your selections are income and you must report them.
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Robert W. Wood practices law with Wood LLP, in San Francisco. The author of more than 30 books, including Taxation of Damage Awards & Settlement Payments (4th Ed. 2009 with 2012 Supplement, Tax Institute), he can be reached at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.