The 91st Academy Awards: Not All Surprises Are in Sealed Envelopes

Not All of the Surprises at This Year’s Oscars Are in Sealed Envelopes

Wolters Kluwer Tax & Accounting Takes a Look at Possible Taxes Both the Winners and the Nominees Could Face

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:

Contacts

MARISA WESTCOTT
212-771-0853
marisa.westcott@wolterskluwer.com

To read the full press release from Business Wire click here.

 

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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