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issued to him a store credit in lieu of the computer.
Nonetheless, petitioners contend that their income should not be
increased by the value of the prize because the computer had no
economic value or benefit to petitioner and because they never
used all of the store credit.
Generally, gross income includes prizes and awards received
by a taxpayer during the year. See sec. 74(a); Hornung v.
Commissioner, 47 T.C. 428, 435-436 (1967); McCoy v. Commissioner,
38 T.C. 841, 843 (1962); sec. 1.74-1(a)(1), Income Tax Regs.
When the prize awarded is not money but goods or services, the
fair market value of those goods or services is the amount to be
included in income. See McCoy v. Commissioner, supra; Wade v.
Commissioner, T.C. Memo. 1988-118; sec. 1.74-1(a)(2), Income Tax
Regs. We have noted:
In valuing taxable prizes and awards for Federal
income tax purposes, courts do not always adopt the
same methodology. In some situations, the retail value
of prizes and awards is used. In other situations, a
wholesale or other discounted value is used. Objective
factors are emphasized, but subjective factors also are
given weight in determining the value of prizes and
awards to particular taxpayers. [Wade v. Commissioner,
supra; citations omitted.]
Petitioners deny that the fair market value of the prize
petitioner actually received was $2,223. In their briefs,
petitioners maintain that petitioner and Computerland never
agreed on the “retail value” of the prize and that petitioner
“received a carefully hedged ‘retail’ value for the prize, but
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