"D. Stussy" wrote:

- quote -

There's no way that Oprah can cause GM to furnish cars and
get a write-off. Explain how Form 1120 would show that and
still balance. Do we even know who issued the 1099s?

Fred F.

Moderator:
This thread is OFFICIALLY closed <period> .


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TaxSrv wrote:
- quote -

My point: I recognize that there's a missing element before
one can call it a prize or award outright. These recipients
shouldn't jump to the conclusion that Oprah's organization
is automatically right just because they have treated it one
way - the way that is in THEIR BEST INTEREST (i.e. no tax
liability to them - and in fact maybe even a writeoff).

It may very well be that if the issue were to come before
the courts, it may be ruled a prize and not a gift.
However, my view is that such a ruling would be NECESSARY
because the facts and circumstances, to me, indicate a
different outcome.

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Stuart A. Bronstein wrote:
- quote -

But it was still left on the books. Treasury never withdrew
it - despite the change. So much for "official guidance."
However, it makes a nice out from the
understatement/negligence penalty should anyone decide to
take the position. :-)

- quote -

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Stuart A. Bronstein wrote:
- quote -

I agree that it doesn't mandate that outcome - but it
doesn't forbid it either. The primary fact is that these
recipients didn't do anything on their own accord to
qualify. To me, that was the determining factor and it
sounds like a gift, not a prize or award. Treatment by the
issuing party is governed by this - not the other way
around. I don't think we're going to have an agreement.

Unless Oprah or one of the other donor parties involved has
a PLR that states otherwise, I stand by my position that her
side's tax treatment of the transactions related to this
transfer appears wrong on its face.

- quote -

I was simply tring to consider all possibilities.

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The timing issue is one of constructive receipt (see Reg.
1.451-2; there are also some rev ruls and some cases that
might apply). If the payor mails the check at year-end, and
under the usual post-office practices the check would not be
expected to reach the payee until the new year, then the
payee (if s/he is on the cash basis method) would not
"receive" the payment for income tax purposes until the new
year. A further wrinkle is the degree to which the payor's
administrative practices factor in - it may be that the
payor's practice is to write the check on day 1 (and date it
accordingly) but to not actually mail the check until day x,
a few days later. In that case, the payee's receipt of the
payment is, arguably, still subject to substantial
restrictions (i.e., the payor's usual administrative
practices), and would therefore not have receipt during the
delay either.

Looking at the cases, it seems that the IRS has given up
being persnikkety about receipt of checks which spend New
Year's Eve in the custody of the Post Office unless there
are other indicia of monkey business (e.g., the payee tells
the payor on Dec. 1 to hold onto the check and not mail it
until Dec. 31).

On that basis, reporting the income in the year of receipt
was a perfectly reasonable reporting position,
notwithstanding the date of the check or the 1099. The
payor, however, would generally be entitled to take the
deduction for the payment in the earlier year - putting the
check in the mail should constitute economic performance on
their part, thus allowing the deduction.

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"D. Stussy" wrote:

- quote -

Oh my. Even if GM _had_ positive taxable income, they
wouldn't care one whit about a deduction limit on a small
advertising expenditure like this. It had to be more cost
effective than their regular advertising methods for the
same amount of money, due to Oprah in the mix and
anticipated media attention.

You keep citing Code/Regs, but case law should have clearer
guidance. Cites with analysis, please.

Fred F.

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:
- quote -

The code specifies that prizes and awards are taxable unless
they are "primarily in recognition of religious, charitable,
scientific, educational, artistic, literary, or civic
achievement" and meet further requirements as well.

If they are in recognition of anything at all, that will
detract from the requirement of gifts that they be from
disinterested generosity.

- quote -

Agreed. But that doesn't mean that anything given that's
not in exchange for some meritorious act must therefore be a
tax-free gift.

- quote -

Because it still doesn't fit the definition of gift as
having been given from disinterested generosity or
affection, which, to me, implies that the business gift, to
qualify as such, would have to be to someone already a
client or, at least, someone personally known to the seller
and who the seller believes could become a client. That
doesn't apply in this case.

Stu

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:
- quote -

Section 74 was amended to make taxable such awards if not
transferred to charity in 1986.

Reg. 1.74-1(b) was apparently enacted prior to the changes
in section 74(b) since it does not acknowledge the
additional requirement that, to be excluded, "(3) the prize
or award is transferred by the payor to a governmental unit
or organization described in paragraph (1) or (2) of section
170(c) pursuant to a designation made by the recipient."

Since statutes always take precedence over regulations, the
regulation to which you refer is now inconsistent with the
statute and, to that extent, irrelevant.

- quote -

That would, in my opinion, be a better way to attack the
deductibility of the transaction for the transferor. But
since those receiving the cars were not necessarily already
customers of the donor, it is unlikely that they would be
classified as gifts even for that purpose.

Stu

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TaxSrv wrote:
- quote -

And neither does a prize or award have a definition in the
Code. However, there's still a difference between these
terms. In general, a prize requires an affirmative act
(e.g. entering a competition, performing some meritorious
act, etc.) while a gift does not. However, I see NO
affirmative action in this situation, so I asked "Why is
this a prize and not a gift? I see a gift." The recipients
did nothing to qualify nor do they have any obligation [to
Oprah or any co-donor], present or future.

- quote -

They just don't want to be stuck with the $25/person-year
limitation, so they simply CALL it something else to write
off the entire cost. Can you say, "Tax shelter opinion"?
Sounds like the same loose playing with the rules as some of
those....

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Stuart A. Bronstein wrote:
- quote -

You will find that the specific exclusion for the nobel
prize (and prizes of merit) is still in a published TR that
hasn't been rescinded....

IF as you say, it's a "gift for business purposes", then
there's only going to be a $25 deduction per car given in
this case... That also isn't consistent with that which was
done.

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"D. Stussy" wrote:

- quote -

Nowhere in the Code or Regs is a gift defined as including a
listing of necessary elements. I believe all that's there
is that it's an objective facts and circumstances test
concerning the nature and purpose of the transfer. Between
GM and Oprah, Inc. or whatever it's called, there's so much
business purpose agenda to what occurred to make a gift
argument weak in the general sense. The fact that Oprah has
made many millions by fostering a certain adorable image of
herself pegs the chances of litigation success at around one
over infinity, at least in my view.

Fred F.

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:
- quote -

According to the courts, a gift is something given from
detached generosity, not dependent on anything the donee may
have done or may do in the future, and unrelated to any
other purpose.

In this case the gifts were clearly given for business
purposes. They were treated that way by the donors (which is
not, as you say, a requirement, but does show the donor's
intent, which is the primary criterion).

If your definition were the correct one, the Nobel Prize
would be an income tax free gift to the recipients. There
used to be a specific exclusion in the law for that kind of
prize, in fact, but no longer.

Stu

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Harlan Lunsford wrote:
- quote -

The law is clear on that: Gifts are not income taxable to
the recipient. I don't see all the elements present
necessary to classify this as a prize/award, but I do see
all the elements necessary to call it a gift (to the extent
that the latter is even defined in the IRC/TR).

I don't see any ambiguity when a required characteristic is
absent....

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Stuart A. Bronstein wrote:
- quote -

Then how do you define a GIFT differently from this
prize/award?

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D. Stussy wrote:
- quote -

Then you thought wrong. Sometimes facts and circumstances don't
matter; it's just a matter of what the tax law actually says.
Facts and circumstances come into play where there may be some
ambiguity. And it seems in this case there is not only ambiguity,
but lack of knowledge among our participants as to just what did
actually happen. If only we had access to the opinions of the
Oprah show's legal counsel given BEFORE everything took place,
might we have a better understanding.

ChEAr$,
Harlan Lunsford, EA n LA

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:
- quote -

It's called evidence. You can never truly know someone's intent.
All you can do is to look at what they actually do and infer.

- quote -

You're living in the past. That was the rule in the old days
in some cases, such as the Nobel Prize. The people who win
that don't do anything for it, don't enter, don't even know
they're up for it until it happens. They used not to pay
taxes on their winning, but these days they do.

- quote -

Because it's not a requirement.

Stu

Moderator:
Welcome to "Tax Wars". The rules are simple: You must carry
off your dead and clean up the blood, name calling is verboten,
as are slogans such as "Death to the infidels", and you may
not mock opponents for illiteracy ignorance, or political
affiliation. These are precedents and that means you, but not
I, are bound by them. rotflmao

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D. Stussy <kd6lvw[at]kd6lvw.ampr.org> wrote:

- quote -

The tax treatment by the donor creates a rebuttable presumption
of the correct tax treatment.

The late Elvis Presley was noted for giving cars away to
strangers. He treated them as gifts and did not issue a 1099.
Thus, they were gifts.

Oprah's company issued 1099's. Any recipient is entitled to
challenge the validity of the 1099. If a recipient did so,
it is an almost certainty that the challenge would be reject
at all administrative levels of the IRS and, if pursued, would
wind up in Tax Court. Perhaps you could locate a recipient
interested in challenging the 1099 and represent them to prove
your hypothesis. In the absence of the success of such a
challenge, it is a taxable event for the recipient.

Dick

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Harlan Lunsford wrote:
- quote -

So, you're saying that this event is taxable solely because
Oprah deducted it?

I always thought it was the facts and circumstances of an
event that determined its tax treatment; not the other way
around.

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Stuart A. Bronstein wrote:
- quote -

That's not intent. That's the RESULT of calling it a prize.

Although not limited to those things enumerated, TR 1-74.1
does list some things that ARE prizes and awards: "Radio
and television GIVEAWAY shows (i.e. game shows), door
prizes, and awards in contests ...." These people did not
compete nor did they perform any action to initiate their
presence at the show where they received the car. They went
because they received an invitation - initiated by OTHERS -
their friends and/or relatives who wrote in - who are not
deemed to be their attorneys, agents, or other legal
substitute for these people themselves; i.e. they did
NOTHING themselves to qualify themselves.

These recipients were selected WITHOUT ANY ACTIONS ON THEIR
PART, nor do they have any future obligation to the donor
for having received the item. - cf 1.74-1(b) conditions 2 &
3 for exclusion from gross income of certain prizes
(although I will grant that condition 1 isn't met); nor were
they selected based on some prior action of merit (i.e. a
past achievement).

I conclude that in order to call it a prize, these people
must have done (including initiated an action to qualify)
something THEMSELVES in order to be selected as recipients.
That element is MISSING. Therefore, the transfer of these
vehicles to the recipients is not a prize or award. These
transactions are gifts - within the meaning of IRC 102(a).

Since you all feel that I am wrong, identify the action that
these recipients performed under their OWN INITIATIVE which
qualified it as a prize or award. I don't see any.

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Dick Adams wrote:
- quote -

Utter BS. The tax treatment by the donor has no bearing on
what the correct tax treatment under the law is. The
treatment is the RESULT of applying the law to the facts of
the transaction, not the other way around.

What you have is a transfer of ownership of an asset. An
auditor's job is the verify the correct treatment of that
transfer. The actual treatment by the audited cannot play a
part in the determination of correctness of the treatment.
It only comes into relevance in identifying any corrective
action should it be found that the actual treatment was not
the correct treatment.

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