As a general rule, in accordance with IRC § 61, the value of any prize or award a taxpayer receives is subject to taxation. Internal Revenue Code (IRC) §§ 74 and 117 provide limited exceptions to this general rule.
IRC § 74 specifically excludes from the income of the recipient certain employee achievement awards and certain prizes or awards transferred to charitable organizations prior to receipt. IRC § 117 specifically excludes from the income of the recipient “qualified scholarship” proceeds. These exceptions are subject to rigid qualifications.
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