Tax-Chapter 5

Federal Income Taxation, Principles and Policies (University Casebooks)

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Chapter 5:Awards A. Prizes  Ways to increase the tax base: Increase items included in gross income  Decrease items allowed as deductions  -Gross income is increased by the reduction of items that are excluded from gross income  Section 74 : Rules on Prizes and Awards: Receipts for winning a company’s sales or other contest  Nobel Peace Prize  Pulitzer Prize  Hickok Belt  Contests to guess jelly beans  Section 74 (a) expressly including prizes and awards in gross income  Section 74 (b) exception for a prize or award made to recognize achievement in  fields (religious, charitable, scientific, educational, artistic, literary, civic) if the  recipient was selected without any action on the recipient’s part to enter the  contest and was not required to render substantial future services as a condition to  receiving the prize or award  - Section 74 (b ): prize and awards that satisfy the requirements of the old  section 74 (b are excluded from gross income only if, in addition, the taxpayer winner designates a  governmental unit or a  section 170 (c) (1) or (2)  charity to receive the award and if the  award is transferred directly to the designee without any use or enjoyment by the taxpayer  <only way to escape the inclusion of GI is not to receive the awards>
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Section 74 (c):  Exclusion for “employee achievement awards.” Award qualifies if  it relates to length of service or to safety  -It must be in the form of tangible personal property, be awarded as part of a 
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Tax-Chapter 5 - Chapter5:Awards A.Prizes...

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