Rev. Rul. 86-31

1986-1 C.B. 75, 1986-9 I.R.B. 4.

PRIZES AND AWARDS; NASA AWARDS

Published: March 3, 1986

Section 74.-Prizes and Awards, 26 CFR 1.74-1: Prizes and awards

  Prizes and awards; NASA awards. The Service will not follow the decision in Jones v. Commissioner, 743 F.2d 1429 (9th Cir. 1984) relating to the taxability of NASA awards, but will continue to follow the decision in Rogallo v. United States, 475 F.2d (4th Cir. 1973) and Rev. Rul. 69-129, 1969-1 C.B. 35.

  The Internal Revenue Service will not follow the decision in Jones v. Commissioner, 743 F.2d 1429 (9th Cir. 1984). That case concerned an award made to the taxpayer by the National Aeronautics and Space Act of 1958, 42 U.S.C. section 2458 (1982). The opinion held that the award was a prize or award excludable from gross income under section 74(b) of the Internal Revenue Code. Rather, the Service will continue to follow the analysis of the law published in Rev. Rul. 69-129, 1969-1 C.B. 35. Rev. Rul. 69-129 holds that awards made under 42 U.S.C. section 2458 are not made primarily in recognition of achievement within the meaning of section 74(b) of the Code, but are made to reward contributions to NASA by employees and others that advance the goals and interests of NASA. As such, these awards are includible in the gross incomes of the recipients. Rev. Rul. 69-129 was upheld in Rogallo v. United States, 475 F.2d 1 (4th Cir. 1973), and remains the position of the Service.

  In addition, the Service will continue to follow section 1.74- 1(b) of the Income Tax Regulations. That provision states that section 74(b) of the Code does not exclude from gross income prizes or awards from an employer to an employee in recognition of some achievement in connection with the employee's employment.

Rev. Rul. 86-31, 1986-1 C.B. 75, 1986-9 I.R.B. 4.