Academy Award Losers Win Big ... But Uncle Sam Wins Even Bigger
By Jeffrey Levine, IRA Technical Expert
Follow Me on Twitter: @IRAGuru4EdSlott
It paid to be a loser at this year’s Academy Awards, at least for some. Instead of taking home the golden Oscar, losing nominees in the big categories – best supporting actor, best supporting actress, best actor, best actress and best director – took home some serious swag. Neil Patrick Harris, the show’s host, also reportedly received the same package of goodies. So, just how much swag is “serious swag?” Try an estimated $168,000 worth of vacations, beauty products, custom candy and even some adult-only products. All free.
Well, sort of free. You might think that all these goodies would count as lavish gifts, bestowed upon some of our most talented artists out of the goodness of the donating company’s heart. If that were the case, these goodies would, in fact, really be free. But let’s face it, the companies providing these items aren’t doing it purely out of respect or for altruistic purposes. They’re doing it for marketing purposes and for financial gain over the long-term. Thus, the gift bag is not so much a “gift,” but rather, a collection of items taxable to the receiving celebrity at fair market value. Thus, receiving celebs could be looking at paying tax on an additional $168,000.
Considering many of today’s Hollywood elite call California –a state that has the highest state income tax in the nation – their home, it’s possible that this “free” bag of goodies could end up costing them over $80,000 in combined federal and state income tax. You might think to yourself, who’s really going to follow-up on this? Aren’t they just going to conveniently “forget” to report that income when it comes time to file their tax returns? Not likely. Believe it or not, the company putting together the swag bag will actually be issuing 1099 forms to the receiving celebrities, ensuring that Uncle Sam is made fully aware of their gift ... I mean income.
So next time you’re at home, thinking to yourself how wonderful it must be to be receiving all these “free” goodies, don’t forget the age-old adage...
...nothing in life is truly free.
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