Sunday, March 4, 2018
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.