Saturday, October 29, 2016
Before accepting your Nobel prize, remember that the IRS § 61(a) requires that all income be included in gross income. Since the Tax Reform Act of 1986, an award for charitable, religious, scientific, educational, artistic, literary, or civic achievement can be excluded from gross income “only if the recipient assigns it to a governmental unit or charity entitled to receive deductible charitable contributions.” Profits assigned to the award recipient are not considered deductible charitable contributions. Accordingly, an award recipient can either accept the prize and pay the income tax, accept the prize and grant it to charity, or assign the award to charity immediately before benefiting from it.
See Conrad Teitell, A Noble Use for the Nobel Prize, Wealth Management, October 25, 2016.