Tax attorney Rob Wood discusses the idea that, in the world of taxes, almost anything can be income. He recounts an unusual story in his Forbes article, “Janitor Finds $100K In Toilet, Gets $76K Reward -- Before Taxes."
A janitor in Australia found the money in a toilet. He turned in the money to the authorities, and after a three-year wait, he received a reward of about $76,000. The finder plans to donate part of the money to a Buddhist temple. If this scenario occurred in the U.S., the reward would be taxable.
Wood explains that the well-known case of Cesarini v. United States sets out the rule followed in tax cases in the U.S. that rewards like this are “treasure troves” and are included in taxable income. “This strikes a lot of people as unfair,” Wood opines The situation becomes even more complicated if the lucky person decides to make a charitable gift. The tax code limits the deduction to only 50% of income, so giving away the whole amount exposes you to tax on money you no longer have.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.