Oprah Memo Essay

545 words - 3 pages

June 23, 2015
Research Memorandum
FROM: Dan Vo
SUBJECT: Oprah’s Pontiac G6 Giveaway

Problem
Oprah opened her 2004-2005 season by giving away 276 Pontiac G6 on September 13, 2004. The problem arises when the people who received the cars should or should not include the value of the car in their taxable income for that year. The car’s designated value was $28,000. There has been debate on whether Oprah’s car was a gift or a prize. The IRS determined it was a prize because the audience had to apply for the seats on the show, and Oprah responded by picking people who needed the cars (MarketWatch, 2004). IRS Regulation 1.74-1 states “Prizes or awards which are includible in gross income include (but are not limited to) amounts received from ...view middle of the document...

S.C. §§ 7206, which prevents fraud and false statements. Hatch was sentenced to 51 months in prison, and was still forced to pay his taxes.

In another case, Turner v. Commissioner, the defendant won two steamship tickets on a radio quiz show and reported only $520 from the tickets in his gross income. The IRS determined that the tickets should have been reported at the full retail price of $2,200. Thus, causing a deficiency in his taxes. However, under Section 74 in Section 61, the Tax Court had “emphasized objective factors in determining the amount to be included in the taxpayer’s income upon the receipt of property other than cash” (AICPA,2011).

Conclusion
Since Oprah’s car giveaway was considered a prize, it must be included in the gross income of each audience member. The value of the car was $28,000, so the tax liability of the car can reach up to $7,000 depending on the individual’s tax bracket. Each individual could either keep the car and pay taxes, sell the car at a profit and pay taxes, or forfeit the car. We can see from Turner v. Commissioner and FindLaw’s case summary on United States v. Hatch that any winnings from television, radio, or any other contest must be included as a form of income in one’s gross income.

References
Rosenberg, Eva. "Audience Participation." MarketWatch. N.p., 17 Dec. 2004. Web. 22 June 2015.

Takacs, Natalie “The Tax Consequences of Point-Based Employee Reward Programs” The Tax Adviser. N.P. 01, Jan. 2011. Web. 22 June 2015.

Campbell. “United States v. Hatch.” FindLaw. 01 Feb. 2008. Web. 22 June 2015. http://caselaw.findlaw.com/us-1st-circuit/1418426.html

SUBJECT: World Furniture Mall

Problem
In 2006, World Furniture Mall

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