Sunday, April 23, 2006
We have extensively blogged the proper tax treatment of payments received by taxpayers who participate in ABC's Extreme Makeover: Home Edition reality TV show (links below). The IRS recently released Information Letter 2006-0012, in response to a request from Congresswoman Marsha Blackburn (R-TN):
The producers . . . pay applicants $50,000 to rent their homes for 10 days. The producers advise the applicants that the home improvements are non-taxable under § 280A(g). The constituent asked that the Congress close this loophole and that the IRS ensure taxes are paid on income won on reality TV shows.
Due to disclosure and privacy laws, I cannot provide specific tax or taxpayer information on a taxpayer's case to anyone other than the taxpayer or the taxpayer's authorized representative. However, I can provide general information, which I hope is helpful....
To the extent that the value of the improvements constitutes a prize or an award, however, it cannot also be considered rent, and therefore could not qualify for the exclusion from gross income under § 280A(g).