IRS, Hollywood Reach Agreement on Gift Bags

The Internal Revenue Service announced the beginning of an outreach campaign to the entertainment industry regarding the taxability of gift bags and promotional items. The effort follows an agreement the tax agency and the Academy of Motion Picture Arts and Sciences.

The academy had approached the IRS shortly after this year's Academy Awards ceremony, looking to clarify the tax issues surrounding gift baskets, and to ensure that any obligations for the prior years were met. Under the agreement, the academy and the IRS settled any tax obligations on gift bags given through 2005. Recipients of this year's bags -- typically given as a thank you to award presenters -- will be issued informational tax forms by the academy and will be responsible for satisfying their income tax obligations.