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Fin 321 - Chapter 2: Research Problem 2

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Question – Chapter 2: Research Problem 2
When Oprah gave away Pontiac G6 sedans to her TV audience, was the value of the cars taxable? On Labor Day weekend in 2006, World Furniture Mall in Plano, Illinois, gave away $275,000 of furniture because the Chicago Bears shut out the Green Bay Packers in the team’s football season opener at Lambeau Field in Green Bay (26-0). Was the free furniture in the form of a discount or rebate taxable, or should the furniture company have handed the customers a Form 1099-MISC?
Response
After thoroughly researching taxable and nontaxable income, the Pontiac G6 sedans awarded to Oprah’s television audience would have been subject to federal taxation and included in their gross income. The Code of Federal Regulations states the taxable and nontaxable income to be included in one’s federal taxes, the code reads that “if you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must include it in your income” (Prizes and Awards, 2003). The fair market value of all prizes and awards, other than certain scholarships, must be included in gross income (Hoffman p. 4-33).
In further research, CNN Money reported that the cars Oprah gave away were indeed subject to federal taxation. Pontiac agreed to pay most of the local charges, including state sales tax and licensing fees, but the fair market value of the car, $28,500, was still subject to be added to the taxpayer’s gross income. The audience members had a choice to either pay up to $7,000.00, depending on the taxpayer’s tax bracket and keep the car, forfeit the car, or sell the car and pay the $7,000.00 with the profits (money.cnn.com). Recently Yahoo! Finance interviewed a contestant, Andrea Schwartz, who was on the television game show The Price Is Right about her $33,000 worth of winnings including a red Mazda 2 compact car, a

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