Oscar Swag Bags to Result in $91k Income to Celebrity Presenters

Tonight's Oscars have lost a bit of their buzz -- not because of the expansion of the Best Picture nominees from five to ten, but because the tax consquences of the swag bags received by the celebrity presenters -- worth a record-setting $91,000 this year -- are well settled.  From IRS and Hollywood Reach Accord on Gift Bags:

The IRS [has] launched an outreach campaign to the entertainment industry regarding the taxability of gift bags and promotional items, following its agreement with the.Academy of Motion Picture Arts & Sciences resolving outstanding tax responsibilities with respect to Academy Awards gift baskets:

• IRS Outreach to Entertainment Industry on Gift Bags (IR-2006-128)
• Gift Bag Questions and Answers
• Academy of Arts and Sciences News Release

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:  What are the federal income tax consequences to a person who makes selections at a free shopping room 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 selections that he or she made at the free shopping room, and must report that amount on his or her federal income tax return. 

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.