The nexus was not immediately clear, but luckily I remembered something my colleague Helen Shaw pointed out—the IRS was looking into gift baskets.
While out getting lunch, I noticed people mulling around carrying blue canvas bags adorned with a yellow "IRS Nationwide Tax Forum" logo. Mixed in with the tax crowd was another group of people wearing lanyards around their necks with yellow tags marked "Crew." They were the technicians working on the MTV Video Music Awards.
Then it hit me. The IRS was cracking down on the gift baskets award nominees—such as Shakira, the Red Hot Chili Peppers, and Madonna, in the case of MTV—received from sponsors. The baskets are opulent. For example, stuffed into this year's $100,000-plus Oscar nominee basket—the granddaddy of all gift baskets—were cashmere pajamas, mink false eyelashes, a weekend at Bernardus Lodge in California wine country, $700 worth of Krups kitchen appliances, and more.
According to a press statement released earlier this month by the IRS, the Academy of Motion Picture Arts and Sciences voluntarily approached the government to clarify the tax issues surrounding gift baskets given to stars. In response, the IRS launched an outreach program to the stars, aimed at getting the Philip Seymour Hoffmans of the world to claim the gifts as income, and to encourage gift givers to fill out Form 1099s.
The gift baskets are not treated as gifts under the U.S. Tax Code, says the IRS, because the organizations and merchants who heap the gifts upon stars, "do not do so solely out of affection, respect, or similar impulses for the recipients of the gift bags." Uncle Sam says that, in general, the gifts are taxable income, equal to the fair value of the product or service.
One question remains, however: Are the "gifts" contained in the IRS canvas bags given out at the tax forum taxable? I wonder if anyone has checked into that?
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