How Much Will the Oscar Nominees Have to Pay in Taxes for Their Gift Bags?
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Every year, Oscar nominees receive a "swag bag" of free stuff from an array of companies.
Forbes crunched the numbers, and found that these celebs may owe Uncle Sam more than $60,000 when all is said and done.
However, the reality of just how taxes are applied to these "swag bags" is more complicated than you might think.
Note: An earlier version of this piece could be read as implying that the maximum possible amount that one could owe upon receipt and redemption of all items in the gift bag was what all recipients would owe upon initially receiving the bag, an assertion we do not endorse and have sought to correct. It also implied that readers of this piece should rent and watch the 2001 film Monkeybone, an assertion we fully endorse and stand by.
In the movie Everything Everywhere All At Once, which won Best Picture this year at the 95th Academy Awards, actress Michelle Yeoh (who took home Best Actress) and actor Ke Huy Quan (who took home Best Supporting Actor) play a couple struggling to figure out exactly how much to pay in taxes, negotiating with an irate IRS agent played by Jamie Lee Curtis (who took home Best Supporting Actress).
Well, now it seems those celebrities, and every other nominee who scored one of the "Everyone Wins" gift bags, will get to experience that same tax-related stress themselves.
Forbes did some math, and determined that those "free" gift bags are anything but, once the government gets involved.
We've previously reported that the "Everyone Wins" swag bags, put together by the firm Distinctive Assets and unrelated to the Oscars themselves, were estimated to have a value of roughly $123,000 (Forbes actually puts the value at $126,000) in items and experiences provided by various companies, from candles to plots of land. Distinctive Assets, who provides the bags to every nominee in the acting and directing categories, sees the bags as "...a straightforward win/win," which provides exposure for the included companies, and gives the giftees a slew of new products to try.
The Internal Revenue Service, however, sees it as taxable income.
Here's how Forbes breaks down the math: "At the 37% IRS tax rate, that’s $46,620. California-based stars will have to pay California’s up to 13.3% tax too, another $16k or so. That’s up to $63,378 in state and federal taxes."
However, while that hefty theoretical tax bill can be eye-catching, it's not necessarily the number most of the gift bag's recipients will be faced with when the taxman comes a'callin'. Distinctive Assets' founder Lash Fray informed us personally that the taxation issue is a common misconception, and offered their clarification for how the actual taxes for these bags break down.
"Recipients are responsible for claiming the fair market value of what they received," Fray told us. "But in this case that value is only about $5,000 (not $126,000) since the vast majority of the value is in the form of gift vouchers for vacations and aesthetic services ("invitations" for tax purposes since they were not purchased, expire and cannot be transferred) meaning they have a value of zero. If they are ever redeemed, then that act would be considered a taxable event."
So, in the end, if all vouchers go unredeemed, the recipients are only paying state and federal taxes on the $5,000 value of the physical items contained within the bag. Should they take full advantage of all the opportunities offered therein, then those "taxable events" will start to add up, perhaps to Forbes' most ominous estimates.
And so, the titanic battle between "Hollywood accounting" and "Government accounting" rages on, like Godzilla vs. King Kong duking it out over Tinseltown, at least until next year's Oscars.
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