Prizes and awards are taxable income except for an award or prize that meets all these four tests:
A prize of merchandise is taxable at fair market value. For example, where a prize of first-class steamship tickets was exchanged for tourist-class tickets for a winner’s family, the taxable value of the prize was the price of the tourist tickets. What is the taxable fair market value of an automobile won as a prize? In one case, the Tax Court held that the taxable value was what the recipient could realize on an immediate resale of the car.
Awards from an employer are generally taxable (as part of regular pay on form W-2) but there is an exception for certain awards of tangible personal property given for length of service or safety achievement. An award in the form of cash, a gift certificate or equivalent item does not qualify for the exclusion, but other types of tangible personal property, such as a watch, or golf clubs are generally not taxable up to a limit of $1,600 for a qualified plan award or $400 for a non-qualified plan award (3.12, 20.25).
3.147.69.49