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.
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
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