Oprah's gift produces taxes

Dear Tax Talk,
Relative to Oprah's "giving" a new car to each of her audience, why is it taxable for income tax purposes or are all the facts not stated? -- W.J.

Dear W.J.,
Only in America can you be sitting innocently in a studio audience and all the sudden get whacked with a $7,000 or more tax bill. For those unfortunate lucky people, they also have a brand-new car worth around $28,000.

If they don't want to pay the taxes, they don't have to take the car. Alternatively, they can sell the car, pay the taxes and have enough left over to buy a smaller car.

Although I don't get to watch Oprah, you'd have to be a malcontent to look this gift horse in the mouth. If you entered a raffle or appeared on a game show in order to win such a prize it would clearly be taxable income. The fact that the studio audience didn't solicit the prize does not alter the taxation.

Bottom line is that you are the richer for having won the car and you don't get rich without paying taxes. If you don't believe me, just ask Oprah.