If you won a noncash prize, only the fair market value of the prize is taxable income to you. If a larger amount is reported in box 3 of your 1099-MISC, you can enter the difference.
For example: you received a Form 1099-MISC that shows $1,000 in box 3 for a television you won in a radio station contest. That amount is reported as other income on your tax return. But you know that the discount store in your city sells the same television (the identical brand and model) for only $750.
Since the fair market value (FMV) of the television is $750, you can enter the $250 difference on the Fair Market Value of Prizes and Awards screen that comes up after you have entered the 1099-MISC.. This way, you pay tax on what the prize is actually worth. It's a good idea to document your adjustments with cutouts of ads (or similar backup materials) and keep them with your other tax documents in case you're ever asked about them.
