Today TaxMama hears from Jed in Missouri, who says. “I won a trip. Due to health issues, I never booked or took the trip. The voucher has since expired. Now the IRS says I owe tax on the value of the trip. Is this correct?”
What? You don’t believe the IRS? This is actually a tough question. You won the prize. The company who gave you the prize issued a Form 1099-MISC with the manufacturer’s suggested retail price as the value of the prize.
Normally, you would do the smart thing and reduce the taxable value of the prize by proving the real retail price – the one people really pay. You would do that by getting ads, or printing out Web pages that
show the real price of a comparable trip. There are some tips in this TaxWatch article about the time Oprah gave a car to every member of her audience. (See link below)
But, not using it at all? I don’t think that’s IRS’s problem.
You won the prize. It had a value.
You chose not to use it, or cash it in, or to sell it, or to gift it to anyone.
I can’t really see a way around the tax – except to prove the reduced value. I may be wrong. So…keep an eye on the comments on TaxQuip #1431. Other tax professionals will be commenting, offering their guidance.
For now, I would just go back to the folks that issued the prize and find out if they can re-issue it since you never used it due to illness.
Incidentally, some of the travel prizes people ‘win’ are really trips with sales pitches for time shares or something else. Make sure your trip was not one of those. Those trips may have very little value, since you have to spend so much time at the sales pitch. Good luck!
And remember, you can find answers to all kinds of questions about winning prizes and other tax issues, free. Where? Where else? At TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
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- TaxMama’s MarketWatch Column :: Oprah’s car give-away to everyone in her audience