[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.74-1]

[Page 305]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.74-1  Prizes and awards.

    (a) Inclusion in gross income. (1) Section 74(a) requires the 
inclusion in gross income of all amounts received as prizes and awards, 
unless such prizes or awards qualify as an exclusion from gross income 
under subsection (b), or unless such prize or award is a scholarship or 
fellowship grant excluded from gross income by section 117. Prizes and 
awards which are includible in gross income include (but are not limited 
to) amounts received from radio and television giveaway shows, door 
prizes, and awards in contests of all types, as well as any prizes and 
awards from an employer to an employee in recognition of some 
achievement in connection with his employment.
    (2) If the prize or award is not made in money but is made in goods 
or services, the fair market value of the goods or services is the 
amount to be included in income.
    (b) Exclusion from gross income. Section 74(b) provides an exclusion 
from gross income of any amount received as a prize or award, if (1) 
such prize or award was made primarily in recognition of past 
achievements of the recipient in religious, charitable, scientific, 
educational, artistic, literary, or civic fields; (2) the recipient was 
selected without any action on his part to enter the contest or 
proceedings; and (3) the recipient is not required to render substantial 
future services as a condition to receiving the prize or award. Thus, 
such awards as the Nobel prize and the Pulitzer prize would qualify for 
the exclusion. Section 74(b) does not exclude prizes or awards from an 
employer to an employee in recognition of some achievement in connection 
with his employment.
    (c) Scholarships and fellowship grants. See section 117 and the 
regulations thereunder for provisions relating to scholarships and 
fellowship grants.