26 U.S.C. § 74

Prizes and awards

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(a) General rule

Except as otherwise provided in this section or in section 117 (relating to qualified scholarships), gross income includes amounts received as prizes and awards.

(b) Exception for certain prizes and awards transferred to charitiesGross income does not include amounts received as prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement, but only if—(1) the recipient was selected without any action on his part to enter the contest or proceeding;(2) the recipient is not required to render substantial future services as a condition to receiving the prize or award; and(3) the prize or award is transferred by the payor to a governmental unit or organization described in paragraph (1) or (2) of section 170(c) pursuant to a designation made by the recipient.(c) Exception for certain employee achievement awards(1) In general

Gross income shall not include the value of an employee achievement award (as defined in section 274(j)) received by the taxpayer if the cost to the employer of the employee achievement award does not exceed the amount allowable as a deduction to the employer for the cost of the employee achievement award.

(2) Excess deduction awardIf the cost to the employer of the employee achievement award received by the taxpayer exceeds the amount allowable as a deduction to the employer, then gross income includes the greater of—(A) an amount equal to the portion of the cost to the employer of the award that is not allowable as a deduction to the employer (but not in excess of the value of the award), or(B) the amount by which the value of the award exceeds the amount allowable as a deduction to the employer.The remaining portion of the value of such award shall not be included in the gross income of the recipient.(3) Treatment of tax-exempt employers

In the case of an employer exempt from taxation under this subtitle, any reference in this subsection to the amount allowable as a deduction to the employer shall be treated as a reference to the amount which would be allowable as a deduction to the employer if the employer were not exempt from taxation under this subtitle.

(4) Cross reference

For provisions excluding certain de minimis fringes from gross income, see section 132(e).

(d) Exception for Olympic and Paralympic medals and prizes(1) In general

Gross income shall not include the value of any medal awarded in, or any prize money received from the United States Olympic Committee on account of, competition in the Olympic Games or Paralympic Games.

(2) Limitation based on adjusted gross income(A) In general

Paragraph (1) shall not apply to any taxpayer for any taxable year if the adjusted gross income (determined without regard to this subsection) of such taxpayer for such taxable year exceeds $1,000,000 (half of such amount in the case of a married individual filing a separate return).

(B) Coordination with other limitations

For purposes of sections 85(c), 86, 135, 137, 219, 221, and 469, adjusted gross income shall be determined after the application of paragraph (1) and before the application of subparagraph (A).

(Aug. 16, 1954, ch. 736, 68A Stat. 24; Pub. L. 99–514, title I, §§ 122(a)(1), 123(b)(1), Oct. 22, 1986, 100 Stat. 2109, 2113; Pub. L. 114–239, § 2(a), Oct. 7, 2016, 130 Stat. 973; Pub. L. 115–97, title I, § 13305(b)(1), Dec. 22, 2017, 131 Stat. 2126; Pub. L. 116–260, div. EE, title I, § 104(b)(2)(B), Dec. 27, 2020, 134 Stat. 3041; Pub. L. 117–2, title IX, § 9042(b)(1), Mar. 11, 2021, 135 Stat. 122.)Editorial NotesAmendments

2021—Subsec. (d)(2)(B). Pub. L. 117–2 inserted “85(c),” before “86”.

2020—Subsec. (d)(2)(B). Pub. L. 116–260 struck out “222,” after “221,”.

2017—Subsec. (d)(2)(B). Pub. L. 115–97 struck out “199,” after “137,”.

2016—Subsec. (d). Pub. L. 114–239 added subsec. (d).

1986—Subsec. (a). Pub. L. 99–514, § 123(b)(1), which directed that subsec. (a) be amended by substituting “(relating to qualified scholarships)” for “(relating to scholarship and fellowship grants)”, was executed by making the substitution for “(relating to scholarships and fellowship grants)” to reflect the probable intent of Congress.

Pub. L. 99–514, § 122(a)(1)(A), substituted “Except as otherwise provided in this section or” for “Except as provided in subsection (b) and”.

Subsec. (b). Pub. L. 99–514, § 122(a)(1)(B), (C), inserted “for certain prizes and awards transferred to charities” in heading and added par. (3).

Subsec. (c). Pub. L. 99–514, § 122(a)(1)(D), added subsec. (c).

Statutory Notes and Related SubsidiariesChange of Name

References to the United States Olympic Committee deemed to refer to the United States Olympic and Paralympic Committee, see section 220502(c) of Title 36, Patriotic and National Observances, Ceremonies, and Organizations.

Effective Date of 2021 Amendment

Pub. L. 117–2, title IX, § 9042(c), Mar. 11, 2021, 135 Stat. 122, provided that: “The amendments made by this section [amending this section and sections 85, 86, 135, 137, 219, 221, 222, and 469 of this title] shall apply to taxable years beginning after December 31, 2019.”

Effective Date of 2020 Amendment

Amendment by Pub. L. 116–260 applicable to taxable years beginning after Dec. 31, 2020, see section 104(c) of div. EE of Pub. L. 116–260, set out as a note under section 25A of this title.

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, § 13305(c), Dec. 22, 2017, 131 Stat. 2126, as amended by Pub. L. 115–141, div. T, § 101(c), Mar. 23, 2018, 132 Stat. 1156, provided that:“(1)In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 86, 135, 137, 170, 172, 219, 221, 222, 246, 469, 613, and 613A of this title and repealing section 199 of this title] shall apply to taxable years beginning after December 31, 2017.“(2)Transition rule for qualified payments of patrons of cooperatives.—“(A)In general.—The amendments made by this section shall not apply to a qualified payment received by a taxpayer from a specified agricultural or horticultural cooperative in a taxable year of the taxpayer beginning after December 31, 2017, which is attributable to qualified production activities income with respect to which a deduction is allowable to the cooperative under section 199 of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section) for a taxable year of the cooperative beginning before January 1, 2018. Any term used in this subparagraph which is also used in section 199 of such Code (as so in effect) shall have the same meaning as when used in such section.“(B)Coordination with section 199a.—No deduction shall be allowed under section 199A of such Code for any qualified payment to which subparagraph (A) applies.”

[Amendment by Pub. L. 115–141 to section 13305(c) of Pub. L. 115–97, set out above, effective as if included in section 13305 of Pub. L. 115–97, see section 101(d) of Pub. L. 115–141, set out as a note under section 62 of this title.]

Effective Date of 2016 Amendment

Pub. L. 114–239, § 2(b), Oct. 7, 2016, 130 Stat. 973, provided that: “The amendment made by this section [amending this section] shall apply to prizes and awards received after December 31, 2015.”

Effective Date of 1986 Amendment

Amendment by section 122(a)(1) of Pub. L. 99–514 applicable to prizes and awards granted after Dec. 31, 1986, see section 151(c) of Pub. L. 99–514, set out as a note under section 1 of this title.

Amendment by section 123(b)(1) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, but only in the case of scholarships and fellowships granted after Aug. 16, 1986, see section 151(d) of Pub. L. 99–514, set out as a note under section 1 of this title.

Applicability of Certain Amendments by Public Law 99–514 in Relation to Treaty Obligations of United States

For nonapplication of amendment by section 123(b)(1) of Pub. L. 99–514 to the extent application of such amendment would be contrary to any treaty obligation of the United States in effect on Oct. 22, 1986, see section 1012(aa)(3) of Pub. L. 100–647, set out as a note under section 861 of this title.

Notes of Decisions

Cited in 16 cases, 1961–2005 · leading case: Murphy v. United States, 45 F.3d 520 (1st Cir. 1995).

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Murphy v. United States, 45 F.3d 520 (1st Cir. 1995). “The 26 U.S.C. § 74 ,83 Claim. Murphy’s claim for relief under 26 U.”

Maurice M. Wills & Gertrude E. Wills v. Comm'r of Internal Revenue, 411 F.2d 537 (9th Cir. 1969). · cites it 3× “§ 62 ; (2) the fair market value of the MG automobile received by taxpayer as a prize or award was taxable as ordinary income under 26 U.S.C. § 74 (a); and (3) the fair market value of the Hickok belt received by taxpayer as a prize or award was taxable as ordinary income under…”

Robert & Barbara Jones v. Comm'r of Internal Revenue, 743 F.2d 1429 (9th Cir. 1985). · cites it 3× “Jones contends that the award should have been excluded from his income as a prize or award pursuant to 26 U.S.C. § 74 . Whether Jones’ award constitutes an ex-cludable prize or award within § 74 presents a question of first impression in this circuit.”

Scheppers v. Scheppers, 2001 Cal. Daily Op. Serv. 794 (Cal. Ct. App. 2001). “( 26 U.S.C. § 74 (a) [prizes are income]; id.”

Marquette Univ. v. United States, 645 F. Supp. 1007 (E.D. Wis. 1986). · cites it 2× “Marquette, apparently relying upon it’s interpretation of 26 U.S.C. § 74 (b) which exempts certain awards made in recognition of educational achievement, did not withhold federal income tax on the amounts awarded.”

Bennett v. United States, 361 F. Supp. 2d 510 (W.D. Va. 2005). “Was the action of the IRS a collection action to which the remedy afforded by 26 U.S.C. § 74 ,33 applies? A taxpayer may bring an action against the United States in a district court if an officer or employee of the IRS, in connection with the collection of any federal tax,…”

George D. Patterson, Dist. Dir. of Internal Revenue v. J. C. Thomas & Martha Thomas, 289 F.2d 108 (5th Cir. 1961). “” He went on to add that, “The only company-wide contest we have left, if it can be called a contest, is the Torch Club, and I do not classify that as a contest, for no one is forced to make it and no bne is criticized if he fails to do so.”

Monroe J. Paxman & Shirley B. Paxman v. Comm'r of Internal Revenue, 414 F.2d 265 (10th Cir. 1969). “26 U.S.C. § 74 . PRIZES AND AWARDS. (a) General Rule.”

Frederick W. Denniston v. Comm'r of Internal Revenue, 343 F.2d 312 (D.C. Cir. 1965). “The statute under which the award to him was made does not authorize awards for “religious, charitable, scientific, educational, artistic, literary, or civic achievement” ( 26 U.S.C. § 74 (b)) ; rather, it authorizes discretionary awards by department heads to those Government…”

Francis M. Rogallo & Gertrude S. Rogallo v. United States, 475 F.2d 1 (4th Cir. 1973). “§ 2458 (1970), qualified as a prize or award primarily in recognition of scientific achievement and was therefore not includable in the Rogallos’ gross income under IRC § 74(b), 26 U.S.C.A. § 74 (b). Appealing, the government contends that § 306 “contribution awards” are…”

Simmons v. United States, 197 F. Supp. 673 (D. Maryland 1961). · cites it 2× “1954, 26 U.S.C.A. § 74 . That section provides: “Prizes and awards.”

Elvia R. McCann & Mrs. Leone A. McCann v. The United States, Ms. Vertie M. Graves v. The United States, 696 F.2d 1386 (Fed. Cir. 1983). · cites it 2× “2 In addition, the trial judge stated that each trip was an “award given by Security * * * for a job well done, and, therefore, constituted * * * gross income under” 26 U.S.C. § 74 (a). 3 Having classified the fair market value of the trips as gross income, the trial judge then…”

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— 26 U.S.C. § 74(b) — 1 case

Rogallo v. United States, 341 F. Supp. 998 (E.D. Va. 1972).

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