Oscar nominees pay taxes on $140,000 ‘gifts’ – IRS Form 1099 says no gift
Everyone likes free stuff, no matter who they are, and the Oscars give out expensive gifts every year. Perhaps things are stricter this year, as a gift bag for top nominees has historically been packed and worth $205,000. This year it’s $140,000 slimmer stuff, but that’s still a lot. Take a look inside the six-figure nominee swag bag. It features 50 gift items curated by Distinctive Assets, an LA marketing firm. They get luxury voyages, delicious snacks, beauty and skincare treatments, and even a Scottish title and (very small) property to call their own from Highland Titles. Companies pay promoters to put their gear in gift bags for stars to use, hopefully somewhere on camera. The companies pay a fee to donate the goodies, and the nominees get the expensive items for free. Everyone wants celebs to show off their gear, so of course companies write off the cost from their taxes. That’s a legitimate business expense for your taxes, but it’s worth thinking about the recipient side of the equation as well. Some celebs turn down gifts, but why would anyone say no to free stuff? One reason is taxes, celebs have to report the value of what they receive as income, and taxes can be high.
How can donations be taxed as income? The answer is if they aren’t actually gifts. And the expensive items add up. The highest federal taxes are 37%, although they could rise, and then there’s a California tax of 13.3%. For many, the total exceeds 50%, especially since you can only deduct $10,000 in state taxes. In addition to these outstanding gifts, nominees will also receive vouchers for cosmetic treatments, personal training sessions, life coaching and much more. There’s a lot more, and everything is taxable even if it’s not provided in cash. In 2006 the academy was discontinued officially Giving gifts due to IRS audit, so gifts are now not officially part of the academy. For years, the entertainment industry and the IRS have argued over the tax treatment of these “gifts.”
Eventually, the tax disputes were settled, with Swag clearly taxable and celebs receiving IRS Forms 1099. And it’s not just celebs, so if you get a gift bag, you’ll have taxable income at its fair market value. Can’t you argue that this was a “gift” not income? With family sure, but not in this context as these traders don’t just give them out of affection or respect. Although the value of these treats really isn’t a reward, you still need to declare it on your tax return. If attendees forget to do this, they will receive an IRS Form 1099 reporting this, and these 1099 forms are key to your taxes. If you don’t report it, it can get ugly with IRS tax bills and penalties.
How about gift vouchers or vouchers for travel or personal services? If you redeem the vouchers or vouchers, state the market value of the trip or service in your tax return. When you make a choice in a “free shopping room,” the value of your choice is also income. Still, some celebs continue to give away the bags or turn them down. You can claim a charity contribution deduction if you donate the gift bag to a qualifying charity. However, the fair market value of the gifts must still be declared in the tax return. Vendors who distribute gifts will issue IRS Forms 1099-MISC. So why don’t celebs get a 1099 form for saying “thanks but no thanks”? A 1099 form identifies you with income. It can be difficult to untangle when you know your 1099 form is wrong.
Cash can also be at the Oscars. A few years ago, women’s clothing daily reported that Meryl Streep canceled a bespoke couture creation by Chanel after the fashion house refused pay her to wear to the Oscars. The $105,000 couture dress was already in production when Streep’s team reportedly said, “Don’t make the dress any further. We found someone to pay us.” A representative for Ms Streep denied that claim, saying it violated Ms Streep’s personal ethics to be paid to wear a dress on the red carpet. But stories about pay-to-play still pop up from time to time. the Daily Mail once remarked that it’s not uncommon for celebrities to make money by wearing dresses, jewelry and accessories to major awards shows. It has been reported that some have been paid as much as $250,000 to wear a dress on the red carpet.
Swag or not, when a celebrity is paid to wear a dress to an event, can they just pocket the money or is it taxable? Like pretty much everything else, the IRS gets its share. And while the practice isn’t widely debated, there’s little doubt that designers paying the fees should issue stars with an IRS Form 1099 for the fee. IRS Forms 1099 are also required for the Oscars gift bags. In the past, the Academy of Motion Picture Arts and Sciences sued Distinctive Assets for promoting the gift bags as “official” Oscar swag. The lawsuit alleged that “Distinctive Assets uses the Academy’s trademarks to raise the profile of their ‘gift bags’ and falsely imply an association, affiliation, connection, sponsorship and/or endorsement.” The dispute was settled amicably. If money was exchanged, the IRS likely got some of it, too, although litigation taxes often depend on the wording of the settlement. This is one of five IRS rules for taxing litigation settlements.