Question

Carlos recently won a $20,000 prize for outstanding achievement in his field. Carlos has requested that the prize money be paid directly to his favorite qualified charity. Which of the following requirements must be met in order to exclude the prize money from Carlos’s gross income?

a. The prize must have been awarded in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement.

b. Carlos must not have applied for the prize.

c. Carlos must not be required to render substantial future services in order to receive the prize.

d. All of the above.

Answer 1

Ans :( D) All of the above.

Explanation:

1) As per IRS section 74(b) prize money is excluded from gross income

• Such awards or price was received primarily in recognition of past achievements of the recipient in religious, charitable, scientific, educational, artistic,etc. Here in the case carlos won prize because of best performance in his field .Hence this condition is satisfied.

• Recipient was selected without his own effort. Here in the cas Carlos did not applied for it but was selectd. Thus this condition is also satisfied.

• the recipient is not required to render substantial future services as a condition to receiving the prize or award.

If all three conditions are met than only its excluded from gross income.

Hence answer is (d) all of the above.