Valuing prizes on TV game shows.

- N
- NadCixelsyd
  
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posted
14 years ago

Fri, Jan 15, 2010 2:54 AM

If one wins a prize (e.g a free trip to Hawaii), taxes are due, both federal and state.

But who values the prize. If I win a car with a "list" price of $26000, the contest promoter wants to give that prize the highest value possible so that they look good. Even if Ford gave the car to "The Price is Right" for promotional purposes, what airs on TV is a prize worth $26000. If I could buy that same car from my local dealer for $21000, can I claim that to be the Fair-Market-V alue (FMV) of the prize?

An extreme case is airline tickets. If the "list" price of travel to Hawaii is $2000, the taxes (Fed and State) could amount to $750, but I wouldn't have any trouble finding that price at expedia.com, so (effectivly), I've won nothing and I might as well decline the "gift".

I'm assuming that the 1099 from the prize promoter will be for "list" price. Has anyone litigated the issue (either win or lose)?

- A
- Arthur Kamlet
  
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posted
14 years ago

Fri, Jan 15, 2010 3:00 AM

The value of the prize is reported on Form 1040 line 21.

If you can prove, through ads, mailings, etc, that the fair market value of the prize is less than they reported on a Form 1099Misc, then I would attach a statement backing out the difference, and claiming only fair market value as taxable income.

This is not a very unusual situation, and is done fairly often.

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- paultry
  
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posted
14 years ago

Fri, Jan 15, 2010 4:12 AM

Brings to mind a mid-60s episode of Andy Griffith wherein Aunt Bee was a big TV game show winner. An IRS agent (played by William Christopher, later, M*A*S*H's Father Mulcahy) came to Mayberry to collect the tax on Aunt Bee's winnings. While in town, the agent had an encounter with Goober, who guiltily pronounced to the agent, "I paid my taxes." The agent, in classic deadpan, replied, "I know!" A great, albeit scripted comeback which I was able to employ several times in my IRS career.