--(BUSINESS WIRE)--What: The Academy Awards ceremony has become famous for glamorous gowns, elegant jewelry, and extravagant swag bags. The gowns and jewelry are often on loan from designers seeking to promote their brands, some even paying celebrities to wear and mention the designer on the red carpet. The swag bags given to nominees include over $100,000 worth of free products and services, including travel destinations, beauty products and treatments, jewelry and more, from brands trying to associate them with the celebrities in attendance. The recipients may think of them as gifts, however, in the view of the IRS, since the transfer is done with a profit motive, these are taxable events.
Why: Just like the cars given away by Oprah Winfrey were viewed as taxable to the recipients, when a business gives something of value to a person to promote its business, the recipient is taxable on the fair market value of what is received. In 2006, after the IRS and the Academy reached an agreement on taxing gift bags given to nominees, the Academy ended the practice. However, the practice of giving away gift bags has continued by outside vendors. Similarly, when a designer pays an actress to wear a gown or jewelry, that payment is taxable to the recipient. Should the gown or jewelry be a gift rather than a loan, the value of the gown or jewelry is also taxable. Even the value of the Oscar statue is potentially taxable to the recipients. Some of the tax issues associated with the Oscars include:
- When is something received a non-taxable gift versus an item or service taxable at its fair market value
- What taxes could a celebrity expect to pay for being paid to wear a gown or jewelry
- What taxes could a celebrity expect to pay for receiving a swag bag
- The tax implications for celebrities who give away, donate, sell or refuse to accept all or part of their swag bag items
- What should celebrities do to avoid these taxes
- Similar tax issues can come up with game show prizes, lottery winnings, and endorsement deals
Who: Tax expert Mark Luscombe, J.D., LL.M, CPA, Principal Federal Tax Analyst for Wolters Kluwer Tax & Accounting, is available to discuss the potential tax issues surrounding the Oscars and similar tax issues in other settings.
Contact: To arrange interviews with Mark Luscombe or other federal and state tax experts from Wolters Kluwer Tax & Accounting on this or any other tax-related topics, please contact: