Reference no: EM13585251

In February 2014, U.S. Deputy Marshal Raylan Givens used TurboTax software to complete his 2013 personal income tax return. When Raylan was nearly finished with his return, TurboTax presented Raylan with a promotional offer claiming to increase his federal income tax refund. Specifically, if Raylan elected to receive any portion of his federal income tax refund in the form of a gift card to Amazon.com, Intuit (the makers of TurboTax software) offered to match an additional 10% of the elected amount in Amazon.com gift certificates, free of charge. Raylan's total tax refund was $6,000, and he elected to apply $5,000 of his total refund to this offer. Raylan received an Amazon.com gift card from Intuit in March 2014 for $5,500 (i.e., $5,000 applied refund plus 10%). Raylan used the entire $5,500 gift card to purchase a new high-definition television and sound system so he could watch all of his favorite shows in style.

Based on the facts above, what amount of the $5,500 gift card, if any, does Raylan need to recognize as gross income for tax year 2014? Why? Assume Raylan is your client and prepare a brief research memo, complete with citations and analysis of primary authority, to support your conclusions. Remember that Raylan is not a professional tax preparer, so it is important that you explain your position in a clear and concise manner that is not overly technical (i.e., do not copy and paste excerpts from primary authorities and call it a day).