Gary won the Nobel Prize in Economics. He receives $1.2 million from the Royal Academy of Sciences in Stockholm. Does he have taxable income from this award?
I.If he keeps the prize money, he must include the award in his gross income.
II.If he tells the Academy to contribute the award to a charitable organization, the amount of the award is excludable from gross income.

Question

Gary won the Nobel Prize in Economics. He receives $1.2 million from the Royal Academy of Sciences in Stockholm. Does he have taxable income from this award?
I.If he keeps the prize money, he must include the award in his gross income.
II.If he tells the Academy to contribute the award to a charitable organization, the amount of the award is excludable from gross income.
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Quizplus · Accepted Answer

Both statements are correct. According to the U.S. tax code, Nobel Prize money is considered taxable income if the recipient keeps the money. However, if the recipient directs the prize money to be given directly to a government unit or a tax-exempt charitable organization without taking possession of the funds, the money is not considered taxable income for the recipient.

Gary Won the Nobel Prize in Economics