TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, March 29, 2008

A Criticism of the Tax Treatment of Celebrity Gift Bags

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.

Celebrity Tax Lore, Scholarship | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference A Criticism of the Tax Treatment of Celebrity Gift Bags:


"Celebrities provide no service to the award shows that provide them with gift bags."

Not true. Celebrities are different than ordinary people at these events because their presence (1) generates publicity for the event, (2) lends credibility to the event among people who value celebrity approval (and there are obviously many of those), and (3) increases the brand equity of the celebrity himself. Celebrities attend big charitable and other events as part of their business of being a celebrity, which (generally) they cultivate relentlessly in furtherance of their career. Celebrities really are different from ordinary people in this regard.

Finally, do a little thought experiment: If an event promotor gave a celebrity $1,000 worth of cash in order to attend, how is it different economically from giving a similar amount of in-kind "gifts" (other than the fact that the company that contributes the gifts is also looking for commercial advantage in the transaction)?

Posted by: TigerHawk | Mar 29, 2008 5:02:58 AM

Tiger Hawk: I agree with you, but I guess I feel a little sympathy for this student. The student is just a J.D. (not even a LL.M. in Tax candidate) who wrote it and who chose to take the harder side of the argument. It's easy to explain why this kind of "gift" is really income in disguise. I'm sure this kid read Duberstein and other things, but I respect the fact that the student took on the challenge.

That being said, I don't really think it was worth posting on TaxProf Blog. It may be a slow weekend, but Paul should know better than to set this kid up as a dartboard. And if blogs like this and blogging here are meant to raise the level of academic, intellectual, &/or professional discourse, who really spends time studying or debunking student notes and comments? Sure, every once and a while a J.D. can write something meriting discussion by the professional or academic community, but that is the rare exception.

I call on Paul to not hang these students up as pinatas. Not only does it potentially lower the level of civility and etiquette (many student notes are softballs waiting to be hit out of the park by a pro), but does it really serve to advance the purpose of the Law Professor Blog Network? I understand this is a blog and there will be an off point post from time to time, but I do not understand an on-point (tax-related) post that is really not worthy of, or does merit, discussion or being read by the community.


Posted by: Adjunct Law Prof. | Mar 29, 2008 5:57:44 PM

After taking a quick look at the comment, I agree with you two- I can't even really see much of an argument for seeing these as gifts, and don't really understand how the proposed change to the gift standard would even work. I would think that creating any kind of coherent treatment would also require redefining what is a business expense. Just don't see how this works, though it is nice to see someone coming out on the other side of what seems to be a fairly one-sided debate.

As to the second point, I doubt the author has a problem with being posted on here. Paul linked to a piece I wrote (I am also a student), and I was quite flattered and appreciated the opportunity, even though my piece (on taxation of charities) might be similarly softball in nature.

Posted by: Andrew | Mar 29, 2008 7:36:10 PM


I figured Paul did it out of the goodness of his heart, and I agree that it is a nice thing to do for students--to get them some publicity and attention. It is not that I think a student note cannot add value, but that too often student notes may not stand up to the criticism of experienced academics and/or professionals.

I think Paul is trying to do a noble thing, but I also think he has a responsibility not to throw students out there to be crushed--which is a distinct possibility. Then again, maybe I give students too little credit--maybe someone who has their note published on TaxProf Blog is ready and wants to take on the challenge.

I am hungry for breakfast, so maybe that is why I feel like a waffle. I guess I am just trying to put out for conversation the ideas of "are they worthy of discussion" and "should we be setting up a forum for an onslaught against someone who is still learning."

Perhaps one solution lies in the old maxim of "less is more". Perhaps Paul might want to give notice about the note/comment an give a link to the SSRN or journal (or a cite), but not publish much more than that. That way, interested parties can go read the article in full, and at the same time the feedback (if any) would be based on a full read rather than a snipet.

Perhaps, perhaps, perhaps...I better go find some waffles.


Posted by: Adjunct Law Prof. | Mar 30, 2008 6:32:17 AM

Just make the "gifting" of these types of celebrity gift bags illegal.

No need to further complicate the tax code, no need to deduct an expense or claim income by either party.

Problem solved.

Posted by: Rudy | Mar 31, 2008 8:43:52 PM