system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: Instead of giving away a prize to someone as part of a contest, why not just sell that prize to the winner for a dollar? Wouldn't that prevent the IRS from collecting taxes on the winnings?
gpt
No. If there is a clear shortfall on the value of a prize, the IRS will determine that the transaction was a bargain purchase. They will assess the fair market value of the prize, and consider the difference between that and your payment as *income,* which is thus taxed.