Every time a prominent American gets a Nobel Prize, tax geeks scurry to examine the tax implications of the monetary reward.
The exercise is particularly interesting this year since we have a sitting president winning the Nobel Peace Prize. In addition to the symbolic plaudits, it carries an estimated $1.4 million cash award.
That could produce a nice chunk of change for the IRS. Or not.
"My guess is that, since his 2009 tax return will surely be made public and given the content of his remarks this morning, the President will give a great deal of the prize money to organizations eligible for the charitable contribution deduction (although which ones to choose must be a challenge," says Ellen Aprill, a law professor at Loyola Law School in Los Angeles, says (via TaxProf Blog). "I wonder if he might choose to make the gift to the United States for public purposes)."
Too bad the Nobel came as a surprise to Obama. If he'd been as prepared as Al Gore was when he got his Nobel Peace Prize a couple of years ago, he could have made arrangements to have the Nobel money go directly to a qualified nonprofit and avoid any inconvenient personal tax costs.
However, since the 2009 Nobel medal and money won't be handed over until the official ceremony in December, President Obama still has time to huddle with tax advisers and work out a way to minimize the tax bite of his prize.
After all, even the country's top official is entitled to legally use the tax laws to pay as little in taxes as possible.
Related posts:
- Taxes and Al Gore's Nobel Prize
- Giving + Getting Back (Worth, austinwoman magazine)
- 2008 Year-end Money Moves: Giving
- Obama and McCain release tax returns
gevin shaw
See “Pulitzer, Nobel, and similar prizes” under “Other Income.”:
http://www.irs.gov/publications/p525/ar02.html#en_US_publink100098473
Bill
Why does the President get any of this money. Shouldn’t it go directly to the Treasury?
Cancer
I disagree. Using section 74(b) should not cause political fallout. If anything, the public would find it counter-intuitive that Obama could be taxed on Noble prize money when he gave all of it away to charity.
Lisa Stone
I think the Nobel Prize is an honor for the President, he was very gracious about accepting it.
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