The gift that keeps on giving
Prefaced by apologies to my former colleague in Baltimore, Stuart Levine, who blogs about tax law far more competently than I could ever aspire to, I did want to comment on this week's IRS announcement that Hollywood's ubiquitous "gift bags" are indeed subject to federal income tax. The agreement between the IRS and the Academy of Motion Picture Arts & Sciences arose out of the ever-increasing amounts of free swag that presenters received from the Academy for doling out Oscars each March. Styled as an "outreach" to the entertainment industry, never let it be said that the Service does not have a sense of humor. For celebrities conditioned to getting freebies worth more than the average person makes in an entire year in consideration for about two minutes worth of teleprompter reading and envelope ripping, the biscuit wheels might be coming off the gravy train. For the rest of us, well somehow we'll have to soldier on.
On the off chance that there are any prospective Oscar presenters who regularly read this blog (the taxation will only apply to future gift bag offerings), I'll try and explain why the sudden change. After all, they're gift bags, right, so what gives with the tax? In the eyes of the Commissioner (the only ones that really count for tax purposes), income by any other name would still smell as taxable:
Q: If these are gifts, why do they have to be treated as income?
A: These gift bags are not gifts for federal income tax purposes because the organizations and merchants who participate in giving the gifts bags do not do so solely out of affection, respect, or similar impulses for the recipients of the gift bags.
In other words, the quid pro quo of stars filling the stage of the Oscars ceremony in exchange for a small token of appreciation from the Academy didn't quite fit the IRS's definition of a gift. And by "small token of appreciation," the Academy in 2006 meant:
stays at the Opus Hotel in Vancouver and the Wickaninnish Inn in Tofino
dinner at five restaurants: Elixir, West, Coast, Pointe, Shelter
yoga sessions, spa treatments
kayaking in Clayoquot Sound, a scenic flight to a remote lake
two Oxia Oxygen Personal Canisters
Gaiam Gift Certificate ($500)
Signature Days Gift Certificate ($500)
Krups XP4050 Premium Pump Espresso Machine and illy's Limited Edition Pistoletto Foundation Espresso Cup Collection (Value: $600)
Vonage, The VTech Expandable Broadband Phone System. (Value: $550)
Two Night Stay in a Suite at The Carlyle, A Rosewood Hotel in New York (Value: $2,300)
Frette cashmere leather trimmed Voyage travel blanket (Value: $1,495)
Firefly mobile phone for kids
The Cheese Impresario at-home artisanal cheese experience for six.
Moonstruck Chocolates: Twelve truffles within a custom hand-crafted Thai silk and teak wood box. (Value: $100+)
The Loved Dog: Personal Training gift card, 3-night stay at Doggie Daycare, and a Luxury Dog Bed.
Tara & Sons pearl and diamond necklace
Mr. Handyman gift certificate for one day of service
Four-night stay in the Vera Wang Suite at Halekulani Hotel, Waikiki Beach, a signature treatment at the famed SpaHalekulani, dinner for two at La Mer at Halekulani
Cornelia Day Resort "Unlimited Card" (worth $2,500), includes a $500 facial, massages, a whole range of beauty products and an entire day of beauty treatments
Dinner party in Morton's Private Boardroom at any of their 69 restaurants (Value: $1500)
Kay Unger vintage silk kimono ($500)
year’s supply of Manni olive oil
two nights (plus surfing lessons) at St. Regis Resort in Monarch Beach, CA ($5,700)
two nights (plus wine tasting) at Bernardus Lodge in Carmel Valley, CA ($2,500)
three nights at one of five Fairmont Hotel & Resorts ($2500)
A BRUGO Travel Mug (featuring the Perfect Temperature Zone)
I can't imagine what it was that tipped the revenuers off that the gift rules might be being taken advantage of.
Although the Academy is discontinuing their Oscars bag, other ceremonies plan to keep them for now. Many presenters, having drunk deeply from the gift bag well for far too long now, will likely just pay the taxes and keep the swag rolling in, though one hopes that some would follow George Clooney's lead and auction or donate them to charity. Not necessarily out of any overriding sense of altruism, although that may play a part, but the value of the charitable donation would then be tax deductible. Gift bags, we hardly knew ye.
On the off chance that there are any prospective Oscar presenters who regularly read this blog (the taxation will only apply to future gift bag offerings), I'll try and explain why the sudden change. After all, they're gift bags, right, so what gives with the tax? In the eyes of the Commissioner (the only ones that really count for tax purposes), income by any other name would still smell as taxable:
Q: If these are gifts, why do they have to be treated as income?
A: These gift bags are not gifts for federal income tax purposes because the organizations and merchants who participate in giving the gifts bags do not do so solely out of affection, respect, or similar impulses for the recipients of the gift bags.
In other words, the quid pro quo of stars filling the stage of the Oscars ceremony in exchange for a small token of appreciation from the Academy didn't quite fit the IRS's definition of a gift. And by "small token of appreciation," the Academy in 2006 meant:
stays at the Opus Hotel in Vancouver and the Wickaninnish Inn in Tofino
dinner at five restaurants: Elixir, West, Coast, Pointe, Shelter
yoga sessions, spa treatments
kayaking in Clayoquot Sound, a scenic flight to a remote lake
two Oxia Oxygen Personal Canisters
Gaiam Gift Certificate ($500)
Signature Days Gift Certificate ($500)
Krups XP4050 Premium Pump Espresso Machine and illy's Limited Edition Pistoletto Foundation Espresso Cup Collection (Value: $600)
Vonage, The VTech Expandable Broadband Phone System. (Value: $550)
Two Night Stay in a Suite at The Carlyle, A Rosewood Hotel in New York (Value: $2,300)
Frette cashmere leather trimmed Voyage travel blanket (Value: $1,495)
Firefly mobile phone for kids
The Cheese Impresario at-home artisanal cheese experience for six.
Moonstruck Chocolates: Twelve truffles within a custom hand-crafted Thai silk and teak wood box. (Value: $100+)
The Loved Dog: Personal Training gift card, 3-night stay at Doggie Daycare, and a Luxury Dog Bed.
Tara & Sons pearl and diamond necklace
Mr. Handyman gift certificate for one day of service
Four-night stay in the Vera Wang Suite at Halekulani Hotel, Waikiki Beach, a signature treatment at the famed SpaHalekulani, dinner for two at La Mer at Halekulani
Cornelia Day Resort "Unlimited Card" (worth $2,500), includes a $500 facial, massages, a whole range of beauty products and an entire day of beauty treatments
Dinner party in Morton's Private Boardroom at any of their 69 restaurants (Value: $1500)
Kay Unger vintage silk kimono ($500)
year’s supply of Manni olive oil
two nights (plus surfing lessons) at St. Regis Resort in Monarch Beach, CA ($5,700)
two nights (plus wine tasting) at Bernardus Lodge in Carmel Valley, CA ($2,500)
three nights at one of five Fairmont Hotel & Resorts ($2500)
A BRUGO Travel Mug (featuring the Perfect Temperature Zone)
I can't imagine what it was that tipped the revenuers off that the gift rules might be being taken advantage of.
Although the Academy is discontinuing their Oscars bag, other ceremonies plan to keep them for now. Many presenters, having drunk deeply from the gift bag well for far too long now, will likely just pay the taxes and keep the swag rolling in, though one hopes that some would follow George Clooney's lead and auction or donate them to charity. Not necessarily out of any overriding sense of altruism, although that may play a part, but the value of the charitable donation would then be tax deductible. Gift bags, we hardly knew ye.
posted by Chris at
8:03 PM
2 Comments:
Having enjoyed many a freebie, let me tell you: this will change a LOT about what types of events folks will make time for -- I'm wondering what happen to the "courtesy suites" at events like Sundance where you get to pick your own schwag....
By
The Film Diva, at 1:40 PM
The LA Times had their story on the "outreaching" this morning. It sounded like Sundance would not mind if it was schwag-free in the future (VW announcing they won't be Sundancing anymore):
"At the Sundance Institute, which puts on the annual Sundance Film Festival in Utah, Elizabeth Daly, the director of strategic development, was heartened by the news.
"People here are all happy," she said. The festival in recent years has become a mecca for corporations looking to deck out young stars in their jeans and sunglasses, and swag suites are often assumed to be "part of the institute and part of the festival," Daly said. "They are not."
She said the IRS campaign "is one element in helping to change the tide." A more difficult tipping point will come when celebrities are too ashamed to be seen making off with so much free merchandise.
"It's become a joke already," Daly said. "If celebrities become embarrassed by this, and it's perceived to be not good for their careers, it will go away."
One of Sundance's main sponsors, Volkswagen, already has decided not to host a swag suite at the 2007 festival, Daly said. "They think it's gotten to the point where it's disgusting," she said.
Corporate sponsors often outnumber films at the festival, and their logos dominate Main Street in Park City. Some celebrities skip the films altogether and just trek from swag suite to swag suite on special corporate shuttles."
By
Chris, at 2:12 PM
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