Saturday, March 29, 2008
Anosheh Azarmsa (J.D. 2008, Loyola-L.A.) has published Comment, Award Shows, Gifts, and Taxes: A Criticism of the Tax Treatment of Celebrity Gift Bags, 28 Loy. L.A. Ent. L. Rev. 27 (2008). Here is the Conclusion:
Based on the present definitions of both income and gifts, the gift bags given by award shows are considered income. Under the current tax system, many items that most people typically view as gifts are not classified as such under the Tax Code's definition. Accordingly, the Tax Code's definition of income should be revised to include a narrower definition of income, thereby allowing for a broader definition of gifts. In addition to examining the donor's intent, courts should look to the existence of factors such as an exchange for services, the presence of third-party vendors, and the intent of the donee to keep the gift. Under these proposed revisions, celebrity gift bags would properly be treated as non-taxable gifts. Celebrities provide no service to the award shows that provide them with gift bags. Also, the bags are given out on behalf of the award shows and not on behalf of the vendors who receive the benefit of publicity from a celebrity's use of their products. Finally, the benefit received by the vendors is negated by the fact that, for the most part, the bags are either not kept by the celebrities or the items are never used.
Viewing the situation objectively, it is not fair for a person to pay taxes on something received as a gift; the tax burden should not lie with the donee. This holds especially true for gifts which are unexpected or lavish. Since the donor was able to acquire the gift, it should be easier for the donor to pay the tax liability as well. Also, the donee should not have to increase his or her gross income because of the donor's generous action of giving a gift. Neither the legislature nor the courts should want to deter donors from giving gifts by attaching a tax burden. Finally, as discussed throughout this Article, it is sometimes difficult for the courts to determine when an item is a gift. This leads to needless inconsistencies in the law.
By taking the “celebrity factor” out, it is easier to understand why gift bags should not be included in gross income. It is erroneous to think that celebrities should pay taxes on gifts just because they have the money to do so. Celebrities, at least from a tax perspective, are like everyone else. Tax laws apply to celebrities in the same way they apply to the rest of the country. When a person receives a gift out of gratitude from another person, he or she should not be responsible for the tax on that gift. The media attention and increased importance of the contents of these gift bags has taken away from their original meaning: an expression of appreciation. Looking at the situation without being blinded by the “celebrity factor” allows one to plainly see how unjust it is to tax a “thank you” gift.