Every two years, a topic of conversation among tax folks is the tax treatment of Olympic athletes. The United States Olympic Committee pays athletes for winning Gold ($25,000), Silver ($15,000), and Bronze ($10,000) medals under its Operation Gold program — these payments clearly constitute income. In addition, one court has suggested that the medals themselves constitute income. In Commissioner v. Wills, 411 F.2d 537 (9th Cir. 1969), the court required Maury WIlls to report as income the value of the Hickok Belt he received for being named athlete of the year, and noted:
The next step would be for the Internal Revenue Service to tax the gold and silver in the medals awarded to Olympic Games’ winners. For the tax treatment of Olympic athletes in other countries, see Olympic Prize Money Should Be Tax Free:
With the issue of Olympic prize money in the news, many people agree Olympic athletes’ prizes should be tax free as in such countries as China and Russia and probably many others.
The Aussies have really got it right. The Australian Olympic Committee waged a $1.1 million, 11-year court battle to make Olympic medal prize money tax-free for its athletes struggling to make ends meet. The only ones who pay taxes Down Under are those earning enough prize and sponsorship to be “carrying on a business of sport, ” such as former swim star Ian Thorpe.
That two-tiered system makes perfect sense and let’s hope someone in Canada with some clout takes up that fight for the athletes. … It bothers me that sport, in this case Olympic sport, gets treated as a bastard child when it comes to considering the merits of athletic contributions to society.
Prize money in the arts and sciences – book awards and such – can be considered tax-exempt by the Canada Revenue Agency as a “prescribed prize,” which are described in the regulations as those received for “meritorious achievement in the arts, the sciences or service to the public.”
Well, winning an Olympic medal at a home Olympics is a “service to the public” these eyes when you consider the feelings of national pride that will be created.
When the COC introduced prize money for the first time for the 2008 Beijing Olympics, they requested and received an opinion from the CRA stating it was taxable income. In Ontario, assuming an athlete had no additional income and was single, that meant a $2,140 hit on gold-medal prize money of $20,000 and $1,037 on the silver-medal award of $15,000. Bronze-medal winners wouldn’t have to pay taxes on their $10,000 if they didn’t make additional income.
John R. Dundon, EA – www.1040.com/jd – email@example.com – Taxpayer Advocate – Enrolled with the United States Department of Treasury to Practice before the IRS – Under contract with the United States Department of Treasury as a Certified ITIN Acceptance Agent- 720-234-1177