It’s widely known that one of the biggest perks of attending an award show is the gift bag you get when it’s time to go home. The Oscars gift bag is always full of high-priced and glamorous items, but did you know the recipients of the bags have to pay taxes on them?
Why Celebs Have To Pay Taxes On Their Gift Bags
Like everything in Hollywood, there is a VIP section, even for getting gift bags. A select few attendees, including the five nominees in each of the four acting categories and the “Best Director” nominees, were given a bag stuffed with goodies that are worth about $137,000.
The bag included items like gold-infused olive oil, $10,000 worth of plastic surgery, and an all-expenses-paid trip to a Scottish castle. However, the gift bags come with strings attached: if you accept every item in the bag, you also have to pay taxes on the gift.
So, what makes the Oscars’ goodie bags taxable? According to the IRS website, the bags aren’t actually classified as gifts because they are not given ”solely out of affection, respect or similar impulses for the recipients.”
“If you think about it as ‘what is the intent of providing those items, products or services?’, obviously it’s the hope that the celebrity is going to use that product, go on that vacation,” Eric Bronnenkant, head of tax at Betterment, told CNBC. “They’re trying to influence behavior.”
The Academy actually stopped giving out gift bags to presenters and performers in 2006 after scrutiny from the IRS and worries over the optics of giving people gifts that came with heavy taxation.
How To Get Around The Heavy Taxation
However, gift bags received by the acting and directing nominees are not distributed by the Academy, but by a company called Distinctive Assets. In addition to the expensive items, recipients also get a form explaining that the gifts are taxable and that they should consult with a tax professional before accepting.
There are loopholes to this process, though. For example, the gift-bag recipients have to officially accept the items. “Let’s say that Will Smith doesn’t go on the trip [to Scotland],” Lash Fary, the founder of Distinctive Assets, said. “His bag isn’t worth $137,000; it’s worth $137,000 minus $50,000. If he doesn’t go to the Golden Door, that’s another $15,000 off. And if he doesn’t use the home renovation services from Maison Construction, that’s another $25,000 off.”
Fary also said that in the 20 years he has been giving gift baskets to Oscar nominees, no one has ever gotten the full value out of one: “A lot of the trips have gotten redeemed, but no one has ever redeemed every single thing.” While the super-expensive gift bags still seem pretty ridiculous to the general public, it’s nice to know that even celebrities have to worry about taxes.