What Kind of Tax Bill Will This Year’s Oscar Gift Bag Generate? 2

Ah, the Oscars. Hollywood navel gazing at it’s finest. The highest honor that can be bestowed upon a bunch of films nobody wants to see. A guaranteed road to all the best roles the industry has to offer, portraying important literary and historical figures like . . . um, OJ Simpson?

Yeah. Anyway. Let’s get to the good stuff. The Oscar Gift Bag!

*Oscar Not Included

*Oscar Not Included. Either kind.

 

This year, the losers for best actor and actress, best supporting actor and actress, and best male director (apparently no girls allowed this year) got a gift bag worth $168,000, or approximately the same amount that 168,000 Haitians make per day (cumulatively, not each). It contains great gifts that anybody would want, like really expensive lip gloss and a liposuction wearable.

So don’t worry, Bradley Cooper. You might have gotten snubbed for Best Actor, but at least your lips will be shiny. And the liposuction can help with that “ton of weight” you gained for American Sniper

As pretty much every article will mention, the best and whitest of Hollywood aren’t getting these bags tax free. Let’s take a look at what that actually means.

Since I mentioned Bradley Cooper, let’s take aim (sorry) at him for the example. In 2014 he made $46 million, so I think it’s fair to assume he’ll be in the top tax bracket in 2015. That means his total tax bill just for getting that bag will be a cool $66,528, or more than the whole bag was worth in 2013.

What if Mr. Cooper decides that some of the Oscar Gift Bag items just aren’t for him? Obviously he needs the lip balm, but maybe his recent movie stunt turned him into the Ron Swanson type and the thought of staying in Italy gives him hives. What’s he to do with the $11,500 Italian hotel package?

Ug, Italy. It's so full of Italians.

Ug, Italy. It’s so full of Italians.

First, no matter what, receiving the Oscar gift bag will generate $4554 in taxes on that item. If the thought of paying nearly $5k for something he won’t use bothers the multi-millionaire, he can sell it, donate it, or gift it.

Selling it: As long as Bradley Cooper sells it for $11,500 or less, he has no additional tax bill (no, a loss on it won’t get him out of paying taxes anymore than you giving your year’s salary to your sister for a dollar would get you out of taxes on your wages). If his shrewd negotiating actually nets him more than the package was valued at, he’d have to pay additional taxes for any amount over $11,500.

Donating it: If Brady Cooper finds a registered charity that wants the package (and hopefully the useless $20,000 Horoscope reading, too), he could put $11,500 on his itemized deductions. At his income he’d almost certainly not get to deduct the full $11,500 due to tax return limitations, but it’d offset at least a portion of the $4554 tax bill.

Gifting it: He might not want to use it, but girlfriend Suki Waterhouse could. Giving the weekend pass to her would generate no additional tax bill as long as it’s his only gift to her in 2015, which seems painfully unlikely. If, however, he’s already gifted more than $14,000 to her this year (super likely), he’d have to pay an additional 40% in taxes, or $4,600. That’s ON TOP OF his $4554 income tax bill. Total taxes on that gifted $11,500 hotel stay: $9,154

That’s assuming he’s already passed the Lifetime Gift Tax Exemption, which we are, because it’s more fun that way.

Worst Case Scenario: Let’s pick on someone else. Meryl Streep, so moved by Patricia Arquette’s equality speech about the 5% pay difference between men and women, decides to gift her entire bag to a Ms. Arquette to do with it what she will.

Assuming everything falls out as wrong as possible, Meryl Streep could end up with a $66,528 income tax bill and a $67,200 gift tax bill, or $133, 728 in taxes on a $168,000 swag bag. That’s a 79.6% effective tax rate. Not quite the 91% marginal rate of the 1950’s, but getting close.

Conclusion

A bunch of rich Hollywood celebrities have to pay taxes on free crap, potentially at ridiculous rates. Not a soul in the world feels sorry for them.

  • Jason Hirst

    You didn’t mention disclaiming the gift. That is, he doesn’t have to accept it at all. And with awards and prizes, under 74b he could disclaim it to a charity, which would most likely be better than accepting it then gifting it to a charity.

    • Good point. I was running under the assumption the gift was accepted, but it doesn’t HAVE to be accepted. I could see a few pretty pissed off people if it did.