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Prize Winnings

Think you're pretty lucky because you won $1,000 in a radio contest? Uncle Sam is even luckier. He's due part of your winnings.

Prize winnings are included in the long list of "other" income that the tax law says is taxable. And it's not just limited to cash awards. You've got to pay taxes on the fair market value of any property you win. So get ready to come up with some cash for Uncle Sam to cover that new Corvette the local Chevrolet dealership presented to you as part of its latest promotional contest.

Be careful when reporting the amount of a noncash prize. In most cases, companies and groups that award prizes, both cash and property, will send you a 1099 form declaring the value of what you won. If your tax return reports substantially less than what the giver claims, your under-reporting could mean a long, hard look from an IRS auditor.

But don't cheat yourself, either. It's not inconceivable for a prize presenter to over value a gift. If you find yourself in this situation, it is possible to do your tax duty without paying too much. This column from Bankrate's tax expert tells you how.

And don't forget about gambling proceeds. They're taxable, too, but at least you get the chance to reduce the tax bite here by subtracting any betting losses from your winnings.

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