MLR

Gift or regift: It’s part of income

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While you were watching Cate Blanchett, Jared Leto, Matthew McConaughey and Lupita Nyong’o winning their acting Oscars at last week’s Academy Awards, perhaps you were feeling a little sorry for the losers.

Not to worry. According to Forbes, all of the nominees received a gift bag stuffed with more than $80,000 worth of prizes, including, among other gifts:

  • $16,000 hair restoration procedure
  • $15,000 walking tour around Japan
  • $9,000 trip to Las Vegas
  • $4,895 home water filtration system
  • $1,572 pet supplies
  • $500 lifetime membership to a meditation gym
  • $120 pink and camo pepper-spray guns
  • $6 device to keep shower drain from clogging

And thanks to the IRS, each gift bag recipient will receive a form 1099, Miscellaneous Income, reminding them to report the value of the gift bag when they file their 2014 tax returns.

The IRS has decided that these gift bags are not tax-exempt gifts because the donors – the companies that supply the products and services – are not acting out of disinterested generosity. In other words, the suppliers expect to benefit from having the stars use their products.

The IRS also acknowledges, however, that regifters who donate the items to a qualified charity may be entitled to a charitable contribution deduction for the value of the item. But they still have to include the value of the item they received in their income.

There’s a lot of great movies that have won the Academy Award, and a lot of great movies that haven’t. You just do the best you can.” – Clint Eastwood