There are many instances where people receive, find, or win items of value. For

Question

There are many instances where people receive, find, or win items of value. For example, imagine finding a $100 bill, or winning a prize on a television game show like the ceramic dog on the old Wheel of Fortune. What about gambling winnings? We all question whether or not these items are taxable since they are not actual wages earned.

Required: Do you perceive an ethical dilemma? Should we report these items as taxable income? If so, is there some type of limit or should we report any and all money, gifts, winnings, etc. as taxable income? In cases where we win gifts like the ceramic dog, there is no money involved, so how would we even place a value on that item?  

Explanation / Answer

Yes, I do perceive an ethical dilemma. Thesecitems should also be reported to the tax authorities. A limit may be laid to a negligible value and when later the gifts which are received should be taxed on the excess amount above the limit or on the whole value of the gift received.

In cases such as ceramic dog where money was not involved, the price or value of the gift received should be considered for the computation of tax purposes because if it is not done a person with a fraudulent nature can acquire and enjoy lots of wealth in form of gift's in view that they are not taxable which doesn't seem to be a good practice.

Hence, this is my opinion regarding computing tax liability on the receipt of gifts which can help to reduce tax evasion.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.