How Can There Be Income Tax on Oscar Swag Bags? Rob Wood Explains
The 2018 Oscars are now history, and winners are enjoying the goodies handed out in the famous Oscar swag bags that winners receive each year. This year’s winners made out very well, receiving gifts that included a twelve-night Tanzania trip for two and a seven-day Hawaiian vacation. But there’s a catch to all this: income tax. Recipients have to report the bags as income, and the tax bill on these gifts can be large. Tax lawyer Rob Wood explains the tax situation in this report. He also discussed the subject in his Forbes article, “Oscars $100K Swag Bag's Taxing Price Tag.”
Wood says that the IRS takes the position that the swag bags are not gifts, but promotional items. The companies providing the goodies actually pay to have their gifts included in the bags. The goal, of course, is to get celebrities to use the items in the bag, thus promoting the products in question. So, the IRS takes the position that the swag bags constitute income. In fact, the promoters are required to issue forms 1099 to the celebrities that can be used when it’s time to prepare tax returns.
Wood points out that accepting the bag is not something Oscar winners are required to do. A celebrity who doesn’t want the swag can simply refuse the bag. But what if the celebrity accepts the bag and then gives away some or all of the goodies to charity? In that case, Wood says, the celebrity will have income equal to the value of the bag but may have a charitable deduction for only part of the value of the items in question. And non-celebrities who get vouchers or gift certificates are in the same situation of receiving reportable income. Think of the Oprah Winfrey show where she gave away cars to everyone in the audience. Wood urges everyone to think about tax possibilities whenever they receive a gift.
Robert W. Wood is the Managing Partner of Wood LLP, San Francisco. Often listed among the best tax lawyers in America, Wood has broad experience in corporate, partnership and individual tax matters. Concerning the tax treatment of litigation settlements and judgments, he is perhaps the preeminent tax lawyer in the United States. He is also an authority on merger and acquisition tax matters, tax opinions, offshore account and entity disclosures, and many types of tax controversies. The Legal Broadcast Network is a featured network of Sequence Media Group.