-PJ
RE: Do they tax Nobel Prize money?
FROM THIS SITE:
http://taxfoundation.org/blog/nobel-prize-award-subject-income-taxation
Pulitzer, Nobel, and similar prizes. If you were awarded a prize in recognition of accomplishments in religious, charitable, scientific, artistic, educational, literary, or civic fields, you generally must include the value of the prize in your income. However, you do not include this prize in your income if you meet all of the following requirements.
You were selected without any action on your part to enter the contest or proceeding.
You are not required to perform substantial future services as a condition for receiving the prize or award.
The prize or award is transferred by the payer directly to a governmental unit or tax-exempt charitable organization as designated by you. The following conditions apply to the transfer.
You cannot use the prize or award before it is transferred.
You should provide the designation before the prize or award is presented to prevent a disqualifying use. The designation should contain:
The purpose of the designation by making a reference to section 74(b)(3) of the Internal Revenue Code,
A description of the prize or award,
The name and address of the organization to receive the prize or award,
Your name, address, and taxpayer identification number, and
Your signature and the date signed.
In the case of an unexpected presentation, you must return the prize or award before using it (or spending, depositing, investing it, etc., in the case of money) and then prepare the statement as described in (b).
After the transfer, you should receive from the payer a written response stating when and to whom the designated amounts were transferred.
These rules do not apply to scholarship or fellowship awards. See Scholarships and fellowships, later.
MORE HERE:
http://www.forbes.com/sites/robertwood/2010/10/14/irs-is-taxing-my-nobel-prize/
Most of us will never win a Nobel Prize, but if we do, it comes with a tax bill. Our old friend the IRS gets a cut of the roughly $1.4 million USD ($10 million Swedish kronor) cash prize. The 2010 winners may not be complaining, but some may be surprised.
Martin Chalfie, won the 2008 Nobel Prize in Chemistry, lamenting that since the Reagan era when the tax code was changed, the IRS collects tax on prizes just like any other income.
President Obama cleverly avoided tax on his Nobel Peace Prize last year—and got great press—by regifting it. Since Jerry Seinfeld’s eponymous series brought “regifting” out of the closet, 60% of women and 40% of men admit they regift. There’s even a “Gift and Re-Gifts” neighborhood on eBay.
Before 1986, many prizes were tax-free as long as no significant services were involved. Since 1986, though, prizes and awards are taxable.
You can decline an award, as George C. Scott did an Academy Award for Patton in 1971. You can even decline a Nobel Prize to avoid the tax. That’s actually surprising, since the tax law routinely attributes taxable income to you “constructively” when you could have received a payment but chose not to.
If you are awarded a cash prize you can turn around and give it to charity but that doesn’t avoid all the tax. Why? You can’t deduct charitable contributions exceeding 50% of your “contribution base”—generally your adjusted gross income.
The limit is even lower (30%) for gifts to certain types of organizations. You can carry over excess deductions for up to five years, but in the meantime, are paying tax on monies you’ve given away.