Annette Nellen, co-editor of the South-Western Federal Taxation Series
Conyers, Order No. Conyers, Order No. 13969-18 (9/11/19). – In this designated order, Ms. Conyers was required to report the Jeep’s value and the one year of car insurance that she won. Her high school entered her into the “Strive to Drive” competition, which recognizes students who are good at attendance and have good grades. The high school had to allow the student to enter. C was the lucky winner of a 2016 Jeep Renegade, which she accepted and registered under her name. C was issued a Form 1099 by the Jeep dealer for $23,780. C didn’t include this in her 2016 return because she considered it a non-taxable gift.
The Tax Court ruled that the Jeep was not a gift because the donor intended to make the transfer deductible business expenses. The history of the rule regarding when a prize can be considered a gift was reviewed by the court. This included when the recipient had not asked for the item or entered any contests.
1954 saw the modification of SS74 by Congress. “In 1954, Congress amended SS74.
1986 added another requirement: the recipient must transfer the award or prize immediately to a government unit or charity.
C was not able to meet the prize exception as she did not transfer the vehicle to a government agency or charity, but instead registered it in her name.
Ask students to rate the ruling and explain why they disagree.
How will C find the money necessary to pay the tax due on the prize?
Check out the rules regarding scholarships that can be excluded. If C is a college-bound student, why is the Jeep not a non-taxable scholarship.
How can this recognition program be restructured in order to maximize the tax treatment of the recipient?
Why would students be awarded a Jeep instead of a cash scholarship? (It is possible that the Jeep was donated by a Jeep dealer to the school contest for publicity.
Chapters 4 and 5 of SWFT Individuals
SWFT Comprehensive: Chapters 4 & 5
SWFT Essentials: Chapters 4 & 10
Are you interested in receiving FREE CPE Credit? To be added to the mailing lists for future events, contact your Cengage Account Executive!
Visit our events page to view recorded webinars.