How can I change the fair market value of prizes?
January 14, 2004
Subject: FMV Question for you
Date: Mon, 29 Dec 2003
From: Vicki
Dear Mr. Gray,
I was searching on the internet when I found something on Game Show winnings written by you. I don't know if you can help, but I hope so.
My 23 year old son won on The Price Is Right this past March. He hasn't received all of the prizes, but most of them (furniture and a car). I know the "Fair Market Value" cannot possibly be the amount they quoted on the show. If the 1099 comes with the actual game show price quote, what do you do to offset that amount for the Federal and State returns? We live in New Jersey, but California is requesting 7% (or CBS is to hold it). For example, he has a dining room set that can't possibly be worth over $8,000 and the Ford Focus station wagon was the MSRP.
Any advice you can give would be greatly appreciated.
Thank you.
Answer
Date: Wed, 7 Jan 2004
Hello Vicki,
Your son may have a fight on his hands. Sometimes the game shows offer a cash settlement instead of the prizes, and that looks like an attractive choice to me considering income taxes will have to be paid on the award. He needs to establish, using advertisements, catalogues and/or affidavits, what the fair market value of these items actually is. He should file a California non-resident income tax return to attempt to recover some of the withholding. He can claim a (limited) state tax credit for the California tax on his New Jersey income tax return. This is one situation where he should definitely be working with an income tax return preparer (preferably a CPA or enrolled agent) to present and document the best case possible.
Good luck!
Mike Gray
For answers to new questions, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight by filling out the form below.
Home Newsletter Archive Introducing Michael Gray, CPA Articles Tax FAQ Need Help? Other Links
Find us on Facebook
Follow me on Twitter
Connect on LinkedIn
Our Blog