Prize award for champion steer.

[Jack from Ohio]

Client's son received notice of not filing for 2009. Son was senoir in High School and won Grand Champion Steer in 4-H for his county. Steer sold for $12, 650. 1099MISC was issued, but son did not file a return. He was led to believe it was not taxable. He had no other income for 2009.

Calculating tax due as prize on line 21 results in $1,373 in tax. Would it be proper to put this on C-EZ and deduct expenses? Even with the SE tax, the amount is considerably lower even as low as $300. Boy has had 4H steers for the past 6 years and not won any prizes.

Your thoughts and opinions?

[JohnH]

Sounds like a case could be made for Schedule C, depending upon who actually paid the Schedule C expenses. But what about potential loss of the dependent exemption on the parents' tax return? (or maybe he saved most of the money)

[Mike D]

I foudnd this attached pdf file regarding prizes won at 4-H events.

Hope this is helpful.

Mike Dubin CPA

taxable_income_charitable_contributions_information.pdf

[TaxmannEA]

When I did this MANY years ago, I filed a Sch. F each year that I had the project. My children did the same. If the boy is in 4-H, then he should have a complete set of books regarding his livestock project. They are graded on this by the county and state organization. He probably made money on this, but the majority of these lose money due to the high cost of show calves, special feed and handling, travel, etc.

The question that I have is does the Sch F income only include the FMV of the calf sold, with the remaining money shown as a prize on line 21?

[TaxmannEA]

Looks like Mike has the definitive answer. Taxable, but no SE.

[Gail in Virginia]

Not sure I am clear on what happened. Did the son win a prize for a Grand Champion steer he had raised, or did he win a prize which was a grand champion steer?

[Jack from Ohio]

Not sure I am clear on what happened. Did the son win a prize for a Grand Champion steer he had raised, or did he win a prize which was a grand champion steer?

He raised the Grand Champion Steer, and it sold for $12,650.

[Lion EA]

Sounds like hobby income. Do be careful to deduct only expenses he paid out of his own funds. (Probably mom and dad already deducted son's expenses in their farm, but let's hope not if they're your clients also.)

[thewizardof]

On Form 1099-MISC, Box 7 is usually SETax, Box 3 is not always SETax. Client's son was a high school senior, but what age and was it a high school project.