Bryan Camp (Texas Tech) asks about the tax issues faced by the beautiful people when companies shower them with their products to use, sparked by today’s Wall Street Journal story about the New York City model given the use of an $80,000 Jaguar (Jaguar Tries a Living Product Placement, by Gina Chon):

He dines at Manhattan’s most-exclusive eateries and glides past security at nightclubs. He wears custom-made shirts and drives an $80,000 Jaguar XK. But can he sell cars? Nico Bossi, a 27-year-old native of Rome, is one of New York’s beautiful people. He not only looks like a runway model, he is also a real-life walking advertisement for Jaguar, the British sports-car maker….

Jaguar, a unit of Ford Motor Co., has given Mr. Bossi the sleek XK to use free, weaving it into his already fabulous lifestyle in hopes that by merely being seen in one, he will persuade friends, acquaintances and wannabes to buy a Jag.

Bryan dicusses the tax issues raised by this arrangement:

I saw an article on p. B1 of today’s WSJ that raises a fun baby tax question that profs might want to use in class. It seems Jaguar is letting rich young things (ages 27-30) tool around for free in a $80,000 Jaguar XK in order to promote the product, by getting it seen by all the beautiful people in all the places beautiful people go to be beautiful (only Jaguar calls them "gorgeous" people instead of beautiful — *sigh* —inflation strikes again). Jaguar pays for the insurance. One such person is 27 year old Nico Bossi, of Manhattan. Jaguar selected him as someone into whose beautiful hands they wanted to put their car, for free. Before getting the free car, "he mostly took cabs or car services" to get around Manhattan (apparently it’s hard to be gorgeous on the subway).

The article repeatedly asserts that Mr. Bossi is "not getting paid" to drive the Jag. Oh yeah? I think this raises some good basic questions here for students on the income tax consequences to Mr. Bossi. For 3 credit courses: (1) What gross income, if any, must Mr. Bossi report from this transaction? The $80,000 street value of the car? Fair rental or lease value of the Jaguar? Average weekly costs he otherwise incurred to pay for taxis and limos? What about the insurance costs assumed by Jaguar? FYI, quick check on Avis shows that "special" or "premium" cars go for a base rate of over $600 a week renting in late July at JFK. I have no idea what leasing deals are available from dealers. (2) What deductions, if any, may Mr. Bossi take against such income? Does he get any deductions against income for gas or parking (is that what it "costs" him to earn the income…?). If so, are the deductions taken above the line or below?

• For the 4 or 5 credit courses: is this income subject to employment taxes?
• For Tax Practice courses: Does Jaguar have to send Mr. Bossi a 1099?
• For English Lit courses: Write a 10 page paper on the kind of character that would be named "Mr. Bossi" in a Jane Austin or Charles Dickens novel.