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Prize

Anything offered as a reward for a contest. It is distinguished from a bet or wager in that it is known before the event who is to give either the premium or the prize, and there is but one operation until the accomplishment of the act, thing, or purpose for which it is offered. In time of war, an enemy vessel or a ship captured at sea by a belligerent power.

The fair market value of a prize or award is generally includible in gross income. Certain exceptions are provided where the prize or award is made in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement providing certain other requirements are met.

Joe and Sue Kainz display a lottery prize check in the amount of 181.5 million dollars. Lottery winners do not receive the full amount of their prizes, because such money is taxed as income.
REUTERS NEWMEDIA INC./CORBIS

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