Tax Consequences of Oprah's Car Giveaway

Tuesday, September 14, 2004

The TaxProf Discussion List was abuzz yesterday with news of Oprah Winfrey's celebration of the premiere of her 19th season by giving away new "fully-loaded" Pontiac G-6 midsize 2005 sports sedans to each of the 276 members of the studio audience. What caught the eye of Michael Kirsch (Notre Dame) was this statement by a spokesperson for Pontiac (which donated the cars) in an AP story: "Pontiac will pay for the taxes." What "taxes" is Pontiac talking about? If federal income taxes, how will Pontiac value the car? Presumably at something less than the $28,400 MSRP, but how much less? How will Pontiac figure out the appropriate tax rate for each individual audience member?

After a spirited discussion, later press reports clarified that Pontiac is only paying the sales tax on the cars, thus obviating the interesting issue of the proper gross-up amount (but leaving the valuation issue).