updated 8/18/2006 2:12:47 PM ET 2006-08-18T18:12:47

Movie stars who took home those lavish gift baskets handed out at this year’s Oscars will get some decidedly unglamorous notices: Don’t forget to pay tax on the loot.

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“There’s no special red-carpet tax loophole for the stars,” Internal Revenue Service Commissioner Mark Everson said Thursday.

The Academy of Motion Picture Arts and Sciences, in an accord with the IRS, agreed to pay taxes due on gift bags handed out through last year. Neither organization would say how much tax was owed or paid.

But responsibility for paying taxes on the latest gifts, handed out in March, falls on the recipients.

They will be getting tax forms from the Academy as reminders.

The agreement marks the beginning of an IRS effort to remind the entertainment industry that award show gifts and promotional giveaways are considered taxable income.

The value of the gifts must be reported on a celebrity’s tax return. They count as income because the IRS does not believe the gifts are given “solely out of affection, respect or similar impulses.”

The IRS called attention to the issue just before this year’s awards. In April, the Academy voted to stop thanking award presenters and performers with gift baskets, although its officials say they hope to find another way to express their gratitude.

In a statement, Academy President Sid Ganis said the baskets had traditionally been viewed as “mannerly thank-yous.”

But the Academy sought an agreement with the IRS because “we didn’t want any of our presenters to get hit retroactively for a gift we had given them,” he said.

Celebrity gifting has become more lavish as marketers try to harness some star power to advertise their goods. The giveaways often include luxury trips, jewelry and electronics.

George Clooney donated his Oscar swag bag to United Way. It fetched $45,100 at auction, benefiting the United Way Hurricane Response and Relief Recovery Fund. Clooney may be eligible for a tax deduction.

The bag, given to presenters at the 78th Annual Academy Awards, included a BlackBerry 8700c, a Kay Unger kimono and a cultured Tahitian-pearl necklace. Clooney also took home another prize — best supporting actor for “Syriana.”

The Internal Revenue Service said it is not conducting a special audit initiative in this area, but questions about gift reporting might arise during an examination of an individual’s tax return. Donors giving gifts to celebrities will be reminded to fill out special informational forms reporting the gifts to the IRS.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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