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Prizes Are Taxable?
As a high school student discovered in the Conyers case. A car dealership held a competition for high school seniors who had perfect attendance and/or good grades. Schools submitted names of qualifying students and the dealership held a drawing for a new car.
The student accepted the new vehicle, but didn’t report the income on her tax return because she thought it was a non taxable “gift”. The student appealed to US Tax Court and lost. The Court ruled that the car was a taxable prize.
What if a person didn’t win a car but something else? The same principle applies. The fair market value of the prize is taxable income unless the IRS specifically exempts the transaction from taxation.
So watch those prizes, the taxes can come back to “bite” . .