Prizes&Awards

Question 1

What amount of prizes and awards are included in GI? How can a taxpayer avoid including these amounts in GI?

Answer 1

1. Inclusion = Cash or FMV of item received
2. Turn down the prize to exclude it from GI
   * Certain awards are excluded from GI

Question 2

What types of prizes/awards can be excluded from GI?

Answer 2

1. Certain Employer Achievement Awards treated as Diminimus Fringe Benefit
2. Awards of Scholarship/Grants (use their rules)
3. Employer awards for Safety and Length of Service
4. Prizes Recognizing Accomplishments like the Nobel/Pulitzer

Question 3

For: Awards that recognize religious, scientific, literary, charitable or other meritorious achievements. (Nobel Prize)
What are the requirements for being excluded from GI?

Answer 3

1. Recipient selected without action on his part
2. Award not based on substantial future services
3. Award immediately donated to a tax exempt organization (including a government unit)

Question 4

What are the requirements for excluding a safety or length of service award from GI? (5)

Answer 4

1. Cost to employer =< $400 (non-qualified plan)
2. Cost to employer =< $1600 (qualified plan)
3. Award is tangible personal property
4. Award is NOT cash or cash equivalent

Question 5

Employer Safety or Length of Service Award:

How does a taxpayer calculate the amount to include in GI?

Answer 5

Greater of:
1. Employer’s Cost of the award - Employer Cost Limit
OR
2. FMV of Award - Employer Cost Limit

Question 6

Are Gambling winnings included in GI?

Are Gambling losses deductible?

Answer 6

Winnings are included in GI.
Losses are deductible up to winnings on Sched A
**Professional gamblers can deduct losses from AGI

Question 7

How much is taxable if an employee’s safety/length of service award amount exceeds the limits?

Answer 7

Include in wages GREATER of :
1. employer’s cost > plan limit but not greater than FMV
OR
2. amount of FMV > limit