Hello! I recently won a contest. I also recently discovered that I'll have to pay taxes on said prize. (wish I had realized beforehand – I might not have entered had I known 🥲) The prize does not include any actual money. It consists of some social media graphics and promotion/ shoutouts on their social media and website. How can I figure out the fair market value for these thing? Does anyone have a guess as to what the fair market value would be?
Trying to Determine Fair Market Value
byu/forgetful_pen intax
Posted by forgetful_pen
2 Comments
Is this a “business to business” prize?
I.e. the things you are receiving are benefiting a business activity? Or are they benefiting you personally?
If they are benefiting your business activity – then it doesn’t matter very much. You would value it at $x for the prize received and an expense of $x for the advertising (or whatever expense category is a better fit). Net impact on taxable income (profit) $0.
BUT – to answer the question – you try to determine what it would cost to purchase a similar benefit – that’s the FMV.
You should get a Form 1099 early next year on what the donor considers to be the fair market value of the prize. That’s what will be reported to the IRS. Use that figure, and you’ll be fine.
If you don’t receive a Form 1099, then you can make a good-faith estimate of the value of the prize The IRS should accept that, especially since the value was probably not reported to them.