Oscar Guests Received $100,000 Gift-Bags

[xli_ne]

From http://www.imdb.com

(http://www.imdb.com)Guests who took home gift-packed bags from Sunday's 78th Annual Academy Awards ceremony may have to pay $30,000 in taxes on their new acquisitions. The bags, which included a $7,000 Victoria's Secret underwear set and a coupon for Lasik surgery, are worth approximately $100,000 each. And unfortunately for the celebrities present, the Unites States Inland Revenue Service has declared that the bags given to Oscar attendees count as taxable income. IRS commissioner Mark Everson quips, "We want to make sure the stars 'walk the line' when it comes to these goody bags."

Its all fine that they have to pay taxes on these gifts, but $100,000?? God damn, and a $7,000 dollar underwear set?? Just boggles the mind.

[Sdashiki]

Glad to see the IRS taxing the rich like that.

Do you think Rod Stewart (http://forums.macrumors.com/showthread.php?t=185079&highlight=rod+stewart) paid his taxes?

Just dont let me see an article where the attendees bitched about paying.

[edesignuk]

I just love the fact that people who can afford to pay for stuff, never actually have to.

It's the same with big execs of companies, they get massive pay packets and bonuses, then the company pays for everything anyway.

Great :rolleyes:

[i.Feature]

I heard on the radio this morning that this has become a bit of a problem because quite a few of the recipients make less than $50,000 a year. Can you imagine the hit you take when your income jumps a third and all you have to show for it is some nice underwear.

[StarbucksSam]

Glad to see the IRS taxing the rich like that.

Do you think Rod Stewart (http://forums.macrumors.com/showthread.php?t=185079&highlight=rod+stewart) paid his taxes?

Just dont let me see an article where the attendees bitched about paying.

Taxing the rich, blah blah blah. I'm a Democrat, but even I think that people who have more having to pay higher percentages is inequitable and wrong.

[macartistkel]

Its all fine that they have to pay taxes on these gifts, but $100,000?? God damn, and a $7,000 dollar underwear set?? Just boggles the mind.

They are just lucky--you can't bitch about it! You know you would take it if it was offered to you and plus I have seen some celebs commenting on how they feel bad about accepting the gifts---its not their fault though and its a great way for companies to advertise their products. :)

[dornoforpyros]

Taxing $100,000 worth of gifts? Sounds fair to me, if your only making $50,000 a year and this represents a huge hike in income don't accept the bag. It's quite simple, or donate it to a womans shelter or something an accept it as a charity write off.

[raggedjimmi]

haha, guess where all that money you put into the cinema just went :p glad I don't care much for cinema.

[Lord Blackadder]

Accept the bag, then ebay it with a reserve of $130k.:cool:

[Doctor Q]

This is exactly why I turned down the offer to be a presenter this year. Also, they forgot to ask me. Or invite me.

And now, a tax question. If they got cash in their goodie bags, would that be taxed as well?

If so... Suppose somebody wants to give you something valuable, but wants to pay the taxes you'll owe for you. Is there a way they can do that?

Let's say they give you a rare Apple mousepad worth $100,000 and you'll owe $30,000 in tax on it (30% marginal tax bracket). If they give you $30,000 in cash to go with the mousepad, do you owe $9000 in tax (30%) on the $30,000 gift? If they give you $9000 for that tax too, do you owe another $2700 tax on the $900? If they give you the $2700, do you owe $810 tax on the $2700, and on so on?

So can they give you $30,000+9000+2700+810+243+73+22+7+2+1=$42,858 in cash (rounding to dollars at each step) to cover all these taxes? You'd use $12,858 of the $42,858 to pay the tax on the $42,858, and the remaining $30,000 of the $42,858 to pay the tax on your mousepad.

[zelmo]

Doctor Q, you have waaaaay too much time on your hands.:p

[TheMonarch]

I don't get it. How the hell can underwear be worth that much? Its probably a couple of dollars worth to make...

Let me get this straight:

If I had a popsicle stick, added a few bells and whistles [Glitter] then slapped a $100,000 price tag [I'd only sell 5 "Limited edition"] and then gave it to someone here on these boards; then they'd have to pay taxes on it? :confused:

[jaydub]

damn I would have loved a coupon for lasik surgery, mine was $$$$$$$$.

[Doctor Q]

Doctor Q, you have waaaaay too much time on your hands.:pNo, I'm just naturally curious. And if people weren't curious, we never would have discovered that the Earth is flat!

I don't get it. How the hell can underwear be worth that much? Its probably a couple of dollars worth to make... Things are worth whatever people will pay. In Hollywood, paying luxury prices for things that aren't worth it on paper is a way of showing off and competing, so it is worth it to some people. If they charged less for some of these items, some of the wealthy would no longer buy them!

If I had a popsicle stick, added a few bells and whistles [Glitter] then slapped a $100,000 price tag [I'd only sell 5 "Limited edition"] and then gave it to someone here on these boards; then they'd have to pay taxes on it? :confused:If nobody pays you that much for one, you have no evidence that that's its value. I'm pretty sure that it's the "fair market value", not the price you ask for your fabulous popsicle stick, that would be taxed. If the recipient can show that it sells for or is worth only $1 on the open market, they only owe tax on $1. And only if they accept your gift.

[floriflee]

I heard on the radio this morning that this has become a bit of a problem because quite a few of the recipients make less than $50,000 a year. Can you imagine the hit you take when your income jumps a third and all you have to show for it is some nice underwear.

Yeah, but do they have to accept the goodie bag if they don't want to take on the tax costs? It seems like it wouldn't be something the Academy would force on you. Take at your own risk.

[hookahco]

This is exactly why I turned down the offer to be a presenter this year. Also, they forgot to ask me. Or invite me.

And now, a tax question. If they got cash in their goodie bags, would that be taxed as well?

If so... Suppose somebody wants to give you something valuable, but wants to pay the taxes you'll owe for you. Is there a way they can do that?

Let's say they give you a rare Apple mousepad worth $100,000 and you'll owe $30,000 in tax on it (30% marginal tax bracket). If they give you $30,000 in cash to go with the mousepad, do you owe $9000 in tax (30%) on the $30,000 gift? If they give you $9000 for that tax too, do you owe another $2700 tax on the $900? If they give you the $2700, do you owe $810 tax on the $2700, and on so on?

So can they give you $30,000+9000+2700+810+243+73+22+7+2+1=$42,858 in cash (rounding to dollars at each step) to cover all these taxes? You'd use $12,858 of the $42,858 to pay the tax on the $42,858, and the remaining $30,000 of the $42,858 to pay the tax on your mousepad.
anything you aquire, whether it be in the form of cash or goods, is taxable and all adds up to your total yearly income.

[hookahco]

No, I'm just naturally curious. And if people weren't curious, we never would have discovered that the Earth is flat!

Things are worth whatever people will pay. In Hollywood, paying luxury prices for things that aren't worth it on paper is a way of showing off and competing, so it is worth it to some people. If they charged less for some of these items, some of the wealthy would no longer buy them!

If nobody pays you that much for one, you have no evidence that that's its value. I'm pretty sure that it's the "fair market value", not the price you ask for your fabulous popsicle stick, that would be taxed. If the recipient can show that it sells for or is worth only $1 on the open market, they only owe tax on $1. And only if they accept your gift.
its too bad that the fair market value of those bags are less than half of their reported value. For example...
One of the celebrities gets a ring shaped like a star which some hotshot celebrity jeweler said goes for about $80,000.00
It was 8 karat and ALL tiny pave diamonds. Its worth about $4,000. sorry people.

[quigleybc]

If people keep pirating movies, then next year the bag might only be worth $50,000....now that would be a crime...:eek:

[Doctor Q]

anything you aquire, whether it be in the form of cash or goods, is taxable and all adds up to your total yearly income.If the Academy adopted the presenters and gave them these gifts as parents to children, different tax rules would apply. Talk about having spoiled children!

[KingSleaze]

Last year, I won a car. GM 'Hot Button' promotion. Hey, great, I got a new car.
I had to pay state sales tax to be able to pick it up. $4000.
I got a tax statement from GM. The car is valued at $21,644 worth of income to me (and that much of a write-off for them).
I've got to pay roughly additional $8000 to federal and state income tax, because no money was withheld in the claiming of the prize.

That car made up about 1/3 of my income for last year. Pity, I can't claim it's a gift and that GM actually made more money off of giving me the car as part of the contest promotion.

Sucks to win a car. (BTW, actual retail price is higher than what GM is dunning me for, fair market value, blah, blah, blah)

So, sure. Tax those 'gift' bags.

[clayj]

Absolutely the value of those gift bags should be taxed as personal income... especially since you KNOW the companies that donated the products to the bags are deducting the value of the donations from their taxable income as a business expense.

The stupidity of the situation is increased by the fact that none of those celebrities are going to publicly endorse the companies that donated to the bags... we're not gonna see Sandra Bullock extolling the virtues of Victoria's Secret anywhere. And I bet half of that stuff (if not more) ends up in the hands of their agents, business managers, family, or friends.

[Clydefrog]

disgusting

[cycocelica]

Sounds fair to me.

[ShaunPriest]

How on earth do they need to pay tax? These are gifts!

[clayj]

How on earth do they need to pay tax? These are gifts!Corporations can't give "gifts". Only individuals can give gifts (in the traditional sense of the word), and if the gift is monetary in nature, there is a non-taxed limit of $11,000 per annum from Person A (the gifter) to Person B (the giftee). Anything beyond that is taxable as normal income. (Of course, this is a rough explanation of the process.)

[ShaunPriest]

So, would, say, the guy who won the Billion iTunes song have to pay tax on all the iPods he won?

Can someone explain the difference between tax in the UK and US? Here (UK) it's simply VAT added to things you purchase (at 17.5%).

[StokeLee]

Taxation is a strange beast. I could win millions on the uk lotto, and not pay a penny tax on the initial win, but, put it in a bank, and then id earn interest, and pay tax on it too. ( i think, going from memory here). I could win a £100,000 scratch card paid out immediately, and not pay tax,,,,
but i could win a £1000 a week for a yea card, and pay tax on it.

i could win a car, and not pay tax on it. Tax is a strange expensive corn eating beast.

[clayj]

So, would, say, the guy who won the Billion iTunes song have to pay tax on all the iPods he won?

Can someone explain the difference between tax in the UK and US? Here (UK) it's simply VAT added to things you purchase (at 17.5%).Yes, he's gonna have to pay tax on all of that... 10,000 songs ($9,900) + 10 iPods ($4,490) + an iMac ($2,000? I am guessing) = roughly $17,000, so his tax bite could be a few thousand dollars. Then again, I think I read that he's a minor (17 years old?), so his prize value may be added to his PARENTS' income and they'll have to factor that into their income tax.

We don't have a nationwide VAT here... most states have a sales tax, and many localities also have an additional sales tax, which is added to the price of most things that you buy. (Other places do not have sales tax. Remember, the US is 50 united states, each of which are allowed to make their own laws, as long as they do not violate Federal law.) Of course, there are many exceptions... depending on the locality, groceries might be tax-free, or a car might be taxed at a different rate (here in NC, it's called a "road use tax" and it's only 2%, rather than the 7.5% sales tax we pay here in Charlotte). You don't pay sales tax on a house (usually), but you do have to pay property taxes on a house or a car each year (usually). Again, this varies wildly from state to state and locality to locality; some states have welcomed businesses (Delaware, for example) or retirees (Florida) by shaping their tax structure to favor certain groups or entities.

Confused yet? :)

[ShaunPriest]

Yes!

[QCassidy352]

Last year, I won a car. GM 'Hot Button' promotion. Hey, great, I got a new car.
I had to pay state sales tax to be able to pick it up. $4000.
I got a tax statement from GM. The car is valued at $21,644 worth of income to me (and that much of a write-off for them).
I've got to pay roughly additional $8000 to federal and state income tax, because no money was withheld in the claiming of the prize.

That car made up about 1/3 of my income for last year. Pity, I can't claim it's a gift and that GM actually made more money off of giving me the car as part of the contest promotion.

Sucks to win a car. (BTW, actual retail price is higher than what GM is dunning me for, fair market value, blah, blah, blah)

So, sure. Tax those 'gift' bags.

:( There's no limit to the government's greed. If they can tax it, they will tax it.

[Doctor Q]

Since I didn't get a definitive answer to my post earlier about whether cash could be added to the gift bags to cover the taxes, I called a CPA and asked.

The answer is that corporations can, and indeed do, add cash to an amount paid to an individual to cover taxes on that amount. It is sometimes called "grossing it up", because it raises the gross amount paid to reach a certain net amount after taxes.

If you want to pay somebody in the 30% marginal tax bracket enough to cover the taxes on $100,000, you must add 100000x0.3 + 100000x0.3^2 + 100000x0.3^3 + ..., which is an infinite sum if not rounded off at each term. It converges to base_amount / ( 1/taxrate - 1 ), or in this case 100000 / ( 1/0.3 - 1 ) = 100000 / ( 3.3333 - 1 ) = 100000 / 2.3333 = $42,857.76, the same number I computed earlier.

So now we know. And I can sleep peacefully tonight.

[TheMonarch]

Woot! Go Q!!! :D :cool:

[rdowns]

Since I didn't get a definitive answer to my post earlier about whether cash could be added to the gift bags to cover the taxes, I called a CPA and asked.

The answer is that corporations can, and indeed do, add cash to an amount paid to an individual to cover taxes on that amount. It is sometimes called "grossing it up", because it raises the gross amount paid to reach a certain net amount after taxes.

If you want to pay somebody in the 30% marginal tax bracket enough to cover the taxes on $100,000, you must add 100000x0.3 + 100000x0.3^2 + 100000x0.3^3 + ..., which is an infinite sum if not rounded off at each term. It converges to base_amount / ( 1/taxrate - 1 ), or in this case 100000 / ( 1/0.3 - 1 ) = 100000 / ( 3.3333 - 1 ) = 100000 / 2.3333 = $42,857.76, the same number I computed earlier.

So now we know. And I can sleep peacefully tonight.

I remember reading that when Oprah (well GM) gave away Pontiac G6s to the whole audience, she took care of the tax bill. I guess she used your formula above.

[mfacey]

i guess this is a similar situation to when Oprah gave all the members of the audience a brand new Pontiac (or something equivilant). Turns out the IRS is a dedicated Oprah viewer and all the audience members got slapped in the face with the tax bill!

At least a car is fairly easy to sell. A $100000 goody bag is slight more tricky though... :D

[Kingsly]

Here's an insane and outrageous concept: Give the multi-million dollar stars a ticket to Uganda and $100,000 to donate there. That would be newsworthy and actually good publicity for the Academy, who could use it right now.
it would also be a write off, wouldn't it?

[floriflee]

I think I'm going to stop entering all those stupid free contests now. I haven't won yet and now I don't want to....

[notjustjay]

Here's an insane and outrageous concept: Give the multi-million dollar stars a ticket to Uganda

Must.. not.. say.. it.. Too.. tempting..

[nbs2]

:( There's no limit to the government's greed. If they can tax it, they will tax it.
Not greed - it's to stop the greedy. Otherwise payment in-kind would rule the roost. "We will pay you $50 Mr. Cassidy, that way you will owe no taxes. As a benefit, we will give you this $500,000 home." Come Christmas "There are no bonuses this year, but everybody should enter our one card monty game, where everybody who guesses right gets a free car!"

[hookahco]

To US residents-
Remember when we were reading about how a general name George Washington led a revolution against King George II of England because he was taxing the residents of the American Colonies at an exteremely high rate? It was 2%.
They were furious about having to give 2% of their income to a government. Now, we pay up to 40%. American government- have fun trying to find my cash.

[jelloshotsrule]

have fun driving on privately funded roads or finding privately funded (no gov't subsidizations) meat or other agriculture, etc....:rolleyes:

[Doctor Q]

News link (http://www.time.com/time/arts/article/0,8599,1228692,00.html)

The IRS has cracked down and ruled that all gift bags are fully taxable. So the groups, like the Academy of Motion Picture Arts & Sciences, who give out these gifts may cut way back on them.

And those who receive them from now on may have to sign a form acknowledging that they understand that they are responsible for the taxes, so they can't claim they didn't know about it.

[xsedrinam]

Well this way, no one's left holding the swag.

[Felldownthewell]

:( There's no limit to the government's greed. If they can tax it, they will tax it.


Wait. So the star with a multi-million dollar salary getting a $100,000 dollar bag full of overpriced lace and bits of metal is not the greedy party? And the government, who (tries/d) to provide services to the general public (not saying they are good at it or even do- just saying that they try or at least put up a pretense of trying) is greedy for applying tax laws already in existance?


Hmmm...

[Zwhaler]

I just love the fact that people who can afford to pay for stuff, never actually have to.

It's the same with big execs of companies, they get massive pay packets and bonuses, then the company pays for everything anyway.

Great :rolleyes:

And on top of that, Resident Bush passed a law so that vehicles purchased that weigh more than 7500 pounds (Hummers, massive SUV's) are allowed to be completely written off of your taxes and all in the same year. It's like they're encouraing the buying of huge gas-guzzling vehicles.

[Timepass]

got to love gift taxes. In about 2 years I going to have to pay some taxes on my car when my parents "give" it to me for gradutating collage. Right now the car is in there name but when I get out of school they are going to pay it off the loan and then give the car to me. The bad part is that it going to be over the gift tax limit on the gift and I am going to have to pay some on it. Even though I already am the one who insured as the primary driver and I pay for most of the maintaince on the car. It is just not in my name yet. Got to love the law and all.
I might be a little more protect because I still claimed as a dependent on taxes so that might protect me from the gift tax because I still be under that claim when the car is transfered.

[wmmk]

If people keep pirating movies, then next year the bag might only be worth $50,000....now that would be a crime...:eek:
too bad the guy who fixes cameras for big movies doesn't get a gift bag.......

[Counterfit]

To US residents-
Remember when we were reading about how a general name George Washington led a revolution against King George II of England because he was taxing the residents of the American Colonies at an exteremely high rate? It was 2%.
They were furious about having to give 2% of their income to a government. Now, we pay up to 40%. American government- have fun trying to find my cash.
It was the lack of representation part that got everyone pissed off, not the tax itself. Read a damn history book.