Earlier this May, while eating his McDonald’s hamburger, Charles Ramsey made the 9-1-1 call that freed Amanda Berry, Michelle Knight and Gina DeJesus from a 10-year captivity from an adjacent Cleveland home.
Though rumors of Ramsey’s receiving free hamburgers for life may not be true, a McDonald’s spokesperson has said that “the local owner-operators of the McDonald’s restaurants in Mr. Ramsey’s neighborhood have connected with him and offered complimentary McDonald’s food for the next year and in addition, [McDonald’s has] made a $10,000 donation to the National Center for Missing and Exploited Children […]”.
In a similar 2004 situation, Oprah gave away 276 new Pontiac G-Sixes to members of her audience for free; however, “according to a spokeswomen for Harpo Productions Inc., Oprah’s company, the recipients [had] to pay a tax on the winnings, just like any prize”. The recipients may have thought that they had free, brand new cars; nevertheless, the $28,500 car would have to be claimed as income. In turn, the individuals would have had to pay anywhere up to $7,000 in tax or have to forfeit the new car.
So, will Charles Ramsey have to pay tax on his McDonald’s burger?
According to the gift tax provisions found in the Tax Code beginning at section 2501, the IRS defines a gift as “any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return”.
The problem with this definition of a gift is that many believe that companies do not give gifts for the same reasons that humans do. Currently, companies can give gifts but the IRS will look into them in greater detail to make sure the gifts aren’t secretly, disguised compensation.
In this case at hand, it looks as though McDonald’s has made all the right steps in ensuring that Ramsey will receive his burgers tax-free. “The gift was made in secret and not used as publicity for the company. Ramsey didn’t ask for the food and he didn’t receive it in exchange for services rendered or future services.”
Since the burgers look as a true free gift and gifts are not subject to federal taxes, Ramsey will indeed be able to enjoy his burgers. However, if Ramsey appears in future McDonald’s promotions such as being photographed eating his meal, this free gift status could be in question.
But for now, Uncle Sam will allow Ramsey to eat his McDonald’s burgers tax-free!
- McDonald’s gives Charles Ramsey free food for a year (money.cnn.com)
- McDonald’s Gives Cleveland Hero Charles Ramsey Free Food For A Year (businessinsider.com)
- Charles Ramsey On Free Burger Offers: ‘I Never Told These People They Could Use My Name’ (newsone.com)
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.