I believe if you win a prize and then refuse it you would not be liable for
the taxes, because basically you are not accepting it. A friend of mine was
on Jeopardy and came in 3rd - they were given several consolation prizes.
They kept a couple but refused a painting/print because they didn't like it.
It was not included in their 1099.
The rule with prizes that they are either worth (for IRS purposes) the
declared value or the "fair retail market value". Sometimes you may get a 1099
for an inflated price. You can determine the "fair market value" and declare
this instead by:
1. Sell the item - declare what you sold it for.
2. Produce evidence that the item is worth X amount rather than Y. For
example ads from a newspaper, Ebay listings, amazon.com listiings,
travelocity.com listings, etc.
Assuming you cannot sell the prize, if you actually could use the trip (or
give it to a loved one who could) and can find a lower "fair market value" -
the prize may still be worthwhile to you. Figure out how much the prize is
valued at and what the tax is. For example, your trip is valued at $2000 (fair
market value), though the casino values it as $3000. Your tax would be on
the $2000 - and say you are in the 28% tax bracket, it is going to cost you
$560 to accept the trip in extra taxes. Is it worth $560 in costs to you?
If not, don't go to the drawing or refuse those particular gifts you don't
like, should you win one of them rather than a prize you do like.
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