Professional sporting teams often host an annual Fan Appreciation Day in order to say “thank you” to their loyal fans. Teams often extend thanks by prize giveaways. At the 2010 Houston Astros Fan Appreciation Day, Bob Choate was the
unlucky winner of 315 coupons from Shipley’s Do-Nuts, each good for a cup of coffee and either a free doughnut or a dozen doughnut holes.
Because the prize was valued greater than $600, the Astros were required to issue Mr. Choate a Form 1099-MISC, reflecting $927.61 as the estimated fair market value of the prize. Of course, the IRS also received a copy of the 1099-MISC. Mr. Choate was required to report the prize as “Other Income” on his tax return, ultimately reducing his 2010 tax year refund by $237.
Mr. Choate first unsuccessfully requested the Astros organization to subsidize the tax bill incurred by their
turning disloyal fan, and then reached out to the owner of Shipley’s, Lawrence Shipley. Mr. Shipley gladly stepped up to the plate.
One should note that the $600 threshold requiring issuance of a Form 1099-MISC does not mean prizes won for less are not taxable income. To the contrary, in fact. The purpose of the prize amount floor is administrative convenience.
To show some grace, although the Astros didn’t pay Mr. Choate’s tax bill, the organization extended to the family four tickets to the team’s 2011 home opener and an autographed Jeff Bagwell baseball. Good luck finding a ballplayer with a wider batting stance. (Mr. Bagwell was known for unconventionally stepping his front foot backwards before swinging the bat.) Astoundingly, Mr. Choate may receive yet another 1099-MISC from the Astros for this prize. What’s the demand for an autographed Jeff Bagwell baseball these days?