Monday, February 6, 2012
Bridget J. Crawford (Professor of Law, Pace University School of Law) and Jonathan G. Blattmachr (Milbank , Tweed, Hadley & McCloy LLP) recently published their article entitled, The Tax Man Wins the Nobel Prize, Tax Notes, Vol. 133, p. 1421 (2011). The abstract available on SSRN is below:
In this article, the authors review the income tax treatment of prizes and awards in the context of Dr. Ralph Steinman who died in 2011 before being named a Nobel Laureate in Medicine. The Nobel Committee has announced that it intends to pay the prize money to Dr. Steinman’s estate. Should this amount be treated as income in respect of a decedent? IRD is one of those terms that is not defined in the Internal Revenue Code, and has no accepted definition. Generally speaking, however, IRD typically is understood as income in an “accrual” sense. The classic case of IRD arises if a taxpayer who owns a bond dies before accrued interest is paid. In that sense, the Nobel Prize appears to be unlike classic IRD. Dr. Steinman had no right to the prize at the time of his death. The winner had not been announced yet. Nevertheless, the Service has a strong argument that amounts received by Dr. Steinman’s heirs should be treated as IRD because of the voluntary nature of the payment by the Nobel Committee to Dr. Steinman's heirs.