Richard and Judith Haeder - Page 38




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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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