My chronicle of how the IRS and Tax Court affect taxpayers' daily lives.

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Sunday, September 13, 2009

Taxation of Celebrity and Presenter Gifts

My wife and I stayed up late tonight to watch MTV's Video Music Awards.  I got to thinking about some articles that I read a few years back about all the swag that tpresenters get for participating.  All of their swag is considered taxable, though it is difficult to gauge the value. (More after the cut).
The IRS includes anything in income that is considered an "ascention to wealth," or  "found treasure."  An agressive interpretation of tax law would consider these gifts to be in exchange for labor, and therefore subject to self-employment tax.  Examples of swag include:
The presenters now have to put some value on these items and give the recipient a 1099 for the value of the swag.  The recipient can take a discount for the FMV that is on the 1099, depending on what s/he does with the items.  For example, if the celebrity turns around and sells the item for $500, but the value included in the 10000 is $1,000, there is an obvious discrepancy between the perception of the fair market value, and the true fair market value. 

Many recipients donate their items to charities.  In that case, the celebrity would have to include the FMV of the item in income on Line 21 of Form 1040 and then claim a charitable contribution to offset the income.  This treatment can result in a limited or reduced deduction due to the itemized deduction reduction or AGI limitation of charitable contributions. 

If you are a celebrity and need tax advice, what are you doing trying to find it on a blog?  If you really need help, feel free to call me.  I probably won't believe that you are who you say you are, but try it anyway!

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Aaron Blau, E.A. is the Vice President of the Central Arizona Chapter of Enrolled Agents and a member of the Government Relations Committee of the National Association of Enrolled Agents. The opinions and ideas expressed here are in no way representative of the official position of the National Association of Enrolled Agents, Arizona Society of Enrolled Agents or the Central Arizona Chapter of Enrolled Agents.

For official comments, please e-mail NAEA Director of Communications at or Arizona Society president

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