Sun, Aug 20, 2006 - Page 11 News List

US tax authorities crack down on Oscars goodie bags

NO ESCAPE The lavish gifts handed to Oscars presenters, who traditionally offer their services for free, constitutes payment and is therefore taxable, the IRS has announced


Those who hold a rose-tinted view of the entertainment industry may wish to look away now. It turns out that the eye-poppingly expensive gifts showered upon the film stars who present the Oscars are not given purely out of a spirit of generosity.

The US' tax authorities are cracking down on the "goodie bags" handed out to awards presenters, which now frequently include luxury holidays, expensive hi-tech gadgets, designer clothing and even free laser eye surgery, and are valued at up to US$100,000 each. The free items are a marketing tool and a de facto payment for the stars' services, the US' Internal Revenue Service (IRS) insists, so do not count as gifts and are liable for tax.

"There's no special red-carpet tax loophole for the stars," IRS commissioner Mark Everson said. "Whether you're popping the popcorn, sitting in the audience or starring on the big screen, you need to respect the law and pay your taxes."

Otherwise, he warned, studios might start giving actors houses and apartments instead of money for starring in films, effectively creating an untaxed barter economy for the super-rich.

More often than not, today's goodie bags are actually a set of certificates redeemable for goods and services -- including a US$25,000 Hawaiian holiday for this year's Oscars presenters, and free eye surgery and gym memberships at the Grammys.

Actors who appear but fail to win at the Emmy television awards later this month in Los Angeles are expected to receive compensatory gifts worth up to US$42,000, including a US$395 couture iPod case.

"At the end of the day, a gift is something you're giving out of affection, with no intent of receiving something in return, and that's not the case here," said Beth Tucker, an IRS spokeswoman.

The goodie list

The contents of goodie bags are not officially made public. But here are some of the items given to presenters at the Academy Awards last March, according to various reports:

* Luxury four-night stay at Waikiki Beach in Honolulu, with 24-hour butler service and spa treatment, worth US$25,000.

* Broadband Internet telephone system, worth US$550.

* Krups espresso machine and related coffee products, worth US$600.

* Apple video iPod, worth US$400.

* Canon Powershot SD30 digital camera, worth US$450.

* Leather-trimmed cashmere travel blanket, worth US$1,495.

* Dinner party at Morton's steakhouse chain, worth US$1,500.

Source: The Guardian

Each bag at the Oscars ceremony last March was reportedly worth US$100,000.

But the goodie bag's days may be numbered. The American Academy of Motion Picture Arts and Sciences, which runs the Oscars, has announced it is discontinuing the practice with immediate effect. It has reached an agreement with the IRS to pay tax on presents given up to last year -- letting the actors who received them off the hook. The stars will be asked to pay tax on gifts received at this year's ceremony.

"It's time for us to move on," Sid Ganis, the academy's president, told the New York Times. Goodie bags started in the 70s as a gesture of gratitude, because presenters are unpaid, but "lately it has become this gigantic thing that has names attached to it, and implications to it, that don't feel pleasant. And we're surrounded by other venues that do it in a way that the press has noted as privileged and excessive."

Presenters at other awards ceremonies may find an unwelcome piece of paper with their stack of certificates: IRS form 1099, on which they will be required to declare taxable gifts.

The change in climate will be bad news for the handful of companies that run the goodie bag industry. Distinctive Assets reportedly charges firms US$20,000 to have their products included in the bags it puts together. But Lash Fary, the company's founder, was defiant in offering a defense in a statement on his Web site.

"Here's how it works," he said. "Celebrities appear as presenters at major awards shows for no charge. We give them a thank-you gift for doing so on behalf of the show. And you don't forfeit your eligibility for gratitude just because you're rich and famous. ... What we do is basic, tried-and-true entertainment marketing."

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