IRS Delves Into Award Show Gift Bags

by Mike Godfrey, Tax-News.com, Washington

21 August 2006

The US Internal Revenue Service announced on Thursday the beginning of an outreach campaign to the entertainment industry, regarding the taxability of gift bags and promotional items distributed in conjunction with appearances by the stars at award shows and other gatherings.

Such bags can include luxury trips, jewelry and electronics, and dozens of award shows take place each year.

The effort follows an agreement announced last week between the tax agency and the Academy of Motion Picture Arts and Sciences.

According to the IRS:

"The Academy and the IRS reached a mutually satisfactory agreement that will resolve outstanding tax responsibilities with respect to Academy Awards gift baskets. The Academy had voluntarily approached the IRS shortly after this year’s awards presentations seeking to clarify the tax issues surrounding the gift baskets, as well as to ensure that any obligations for the prior years were met."

"Under the closing agreement, the Academy and the IRS have settled the tax obligations with respect to gifts given through 2005. Recipients of this year’s gift basket will be issued appropriate informational tax forms by the Academy and will be responsible for satisfying their income tax obligations."

“We appreciate the Academy’s leadership on this issue,” IRS Commissioner Mark W. Everson stated, continuing: “The gift basket industry has exploded, and it’s important that the groups running these events keep in mind the tax consequences.”

“There’s no special red-carpet tax loophole for the stars,” he added. “Whether you’re popping the popcorn, sitting in the audience or starring on the big screen, you need to respect the law and pay your taxes."

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