Prizes and Awards: Looking the Gift Horse in the Mouth

Is it a gift, a prize, or an award? That’s the question! 

The IRS would like the taxpayer to receive a prize or an award because that’s taxable income. The taxpayer, on the other hand, would prefer to receive a gift because that isn’t taxable income. 

The taxation of prizes, gifts and awards has a long and fascinating history. Our current tax principles of the receipt of prizes, gifts and awards is the outcome of many significant court cases. In my new CPE course for Canopy, I discuss these important court cases and show how some of the early ideas about the taxation of prizes, gifts and awards have been completely overturned in later decades. Then we'll delves into employee achievement awards—taxable? Maybe! 

Lotteries are always fun to talk about. We know that winning a lottery means you have ordinary income, but what happens if you win the lottery and then sell the income stream to someone else? Does the tax treatment change if you win a raffle? In the course, I also go over reporting winnings from gambling, including a relatively new type of gambling called fantasy sports.

After completing this course, you’ll be able to:

• • • Understand the crucial differences between prizes, awards and gifts
    • Define an employee achievement award
    • Advise clients as to the tax issues associated with lottery winnings
    • Discuss the tax consequences of gambling winnings
    • Explain the taxation of fantasy sports

Course information: 

• • • Level: Beginner
    • Cost: Free
    • Field of Study: Taxes
    • Advanced Prep: None
    • Credit Type: CE & CPE
    • Credit Hours: 1