TaxProf Blog

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

Sunday, March 4, 2018

A Taxing Oscars: $100,000 Swag Bags Come With $50,000 Tax Bill

OscarsMoney, This Year's Oscar Swag Bags Could Come With a $50,000 Tax Bill:

Swag bags are a big perk of going to the Oscars. But movie stars who accept the goodies could owe a hefty tax bill. ...

For top-earning movie stars, the result could be a tax bill that eats up roughly half the value of the bag. While the recent Tax Cuts and Jobs Act lowered the top federal income tax rate, it still amounts to a hefty 37%. There’s also state income tax, which in California tops out 13.3%. In other words, movie stars who collect a gift bag worth $100,000 could end up owing $50,300 in state and federal taxes. ...

To be sure, stars have some options to avoid paying out of pocket for stuff they don’t really want, says San Francisco tax lawyer Robert Wood [Oscars $100K Swag Bag's Taxing Price Tag].

IRS, Gift Bag Questions and Answers:

Q: What are the federal income tax consequences to a person who accepts a gift bag in recognition of involvement in an awards show?
A: In general, the person has received taxable income equal to the fair market value of the bag and its contents and must report that amount on his or her federal income tax return. ...

Q:  If these are gifts, why do they have to be treated as income?
A:  These gift bags are not gifts for federal income tax purposes because the organizations and merchants who participate in giving the gifts bags do not do so solely out of affection, respect, or similar impulses for the recipients of the gift bags.

Q: Can the recipient take a charitable contribution deduction if he or she contributes the gift bag to charity? 
A: If the gift bag is donated to a qualified charitable organization, the recipient may be able to take a tax deduction for his or her charitable contribution, subject to applicable limitations and requirements. But this does not change the taxability of the value of the items.  The fair market value must still be reported on the celebrity recipient’s federal income tax return.

Celebrity Tax Lore, Tax | Permalink