You are taxed on what you could sell the prize for. Which raises an interesting question if the trip cannot be transferred (or sold). Wills v. Commissioner, a case I tried for the irs years ago had a stipulated value (by the IRS and taxpayer) for the diamond studded trophy Maury Wills won. The value used was the cost of production. One of the reasons was that using a "what it could have sold for" might have been higher than it should be because the value attached after it was won due to the person who won it. I've never seen a good analysis of how to take that into account
