Paul won the Nobel Prize for Literature. He is awarded $1,000,000. His tax situation is
I.In general, the award must be included in gross income.
II.The award may be excluded if he gives it to a qualified charity.
III.The award may be excluded if he gives it to the U.S. Government.
IV.Awards for literary achievement are not taxable.

Question

Paul won the Nobel Prize for Literature. He is awarded $1,000,000. His tax situation is
I.In general, the award must be included in gross income.
II.The award may be excluded if he gives it to a qualified charity.
III.The award may be excluded if he gives it to the U.S. Government.
IV.Awards for literary achievement are not taxable.
​

Quizplus · Accepted Answer

Statements I, II, and III are correct. Generally, prizes and awards are included in gross income (I), but there are exceptions allowing for exclusion if the prize or award is donated to a qualified charity (II) or to the U.S. Government for exclusively public purposes (III). Statement IV is incorrect because awards for literary achievement, like the Nobel Prize, are taxable unless the conditions of II or III are met.

Paul Won the Nobel Prize for Literature