## Facts

- Reginald and Marie Turner filed a joint federal income tax return for 1948.
- Reginald Turner won, by chance on a radio program, two first-class round-trip steamship tickets for travel between New York and Buenos Aires.
- The prize tickets were nontransferable, usable only within one year, and subject to sailing-date approval by the carrier’s agent.
- Reginald surrendered the two first-class tickets and, after paying $12.50, received four round-trip tourist-class tickets between New York and Rio de Janeiro.
- The family used the four tourist-class tickets for a 1948 round trip between New York and Rio de Janeiro.
- The Turners reported $520 as the value of the prize on their 1948 return.
- The Commissioner issued a deficiency notice valuing the prize at $2,220, described as the retail price of two first-class New York–Buenos Aires round trips; the Commissioner later conceded a lower includible amount of $1,400.
- The Turners petitioned the Tax Court, disputing the Commissioner’s valuation as overstating the economic benefit given the restrictions and their circumstances.

## Issues

1. How should a non-cash prize with significant restrictions (including nontransferability and limited usability) be valued for inclusion in gross income?
2. Whether the Commissioner may treat the prize’s full retail ticket price as the amount of income when the recipient cannot readily convert the prize to cash and receives a different practical benefit.

## Decision

- The Tax Court rejected the Commissioner’s retail-price valuation method as mechanically controlling.
- The court held the prize was includible in gross income at an amount less than the asserted full retail price because the restrictions materially reduced the economic value to the taxpayers.
- The deficiency was reduced based on the court’s lower valuation of the prize.

## Legal Principles

- Non-cash prizes are includible in gross income, but the includible amount must reflect the property’s value as received under the governing restrictions.
- Full retail or list price is not necessarily the correct measure when the property is nontransferable, time-limited, or otherwise not readily convertible to cash.
- Valuation may consider the practical economic benefit actually obtained, rather than a hypothetical price paid by an unrestricted purchaser.

## Conclusion

The Tax Court treated the restricted cruise-ticket prize as taxable income but valued it below full retail price, holding that substantial limitations on transfer and use can materially reduce the proper amount includible in gross income.


Turner v. Commissioner, T.C. Memo 1954-38, 13 T.C.M. (CCH) 462 (1954)