Question

Research Problem 2. Your client, John Butler, is an avid Houston Astros fan. Last March at the Astros’ home opener, as a result of a random drawing of those in attendance at the game, John won 300 Shipley Do-Nut coupons. Each coupon entitled him to a cup of coffee and a free doughnut or a dozen doughnut holes. John used some of the coupons (approximately 20), but he found that eating so many doughnuts directly conflicted with his goal of losing weight. The unused coupons expired on January 1, 2018. Thus, John was surprised when he received a Form 1099 in February 2018 that valued his prize at $900. John would like to know whether the value of the doughnut coupons should be included in income and asks you to research his question. If you conclude that their value should be included in income, John also would like to know if he can reduce his gross income by including in income only the value of the coupons that he used. He has the unused coupons as documentation that neither he nor anyone else used them.

Answer 1

ANSWER:

• According to IRS Instructions for Form 1099-MISC (2017), page-5, "the installment of rewards is viewed as made when really paid".
• Further, according to IRS Publication 525 (2016), page-32, significant concentrates imitated as under:
• "Prizes and honors. In the event that you win a prize in a fortunate number illustration, TV or radio test program, excellence challenge, or other occasion, you should incorporate it in your pay. For instance, in the event that you win a $50 prize in a photography challenge, you should report this pay on Form 1040, line 21. On the off chance that you decline to acknowledge a prize, do exclude its incentive in your pay. Prizes and honors in products or administrations must be incorporated into your wage at their honest esteem. "
• Consequently, along these lines, John Butler does not require detailing the wage from the estimation of coupons in his Individual Tax Return Form-1040, which he didn't assert.