:: donning CPA hat ::
There are many things being discussed here, and I’ll try to touch on all of them.
Gifts to the IRS are those done out of detached generosity. You generally need some sort of relation with the donee, or at very least no clear business motive to your generosity. Thus it becomes practically impossible to give a genuine gift to anyone with whom you have a business relationship, such as an employee, customer, or vendor. It is also impossible to give a genuine gift to random people if you publicize that you are giving out gifts at random; John Oliver publicly forgave a bunch of medical debt that he bought up cheaply a while ago, and if he hadn’t have sold it to a non-profit whose sole purpose is to buy up medical debt to forgive it, those people whose debts were forgiven could be subject to cancellation of debt income. It had to be a genuine act of generosity from the non-profit, who could by definition not profit from the debt being forgiven, plus a “terrible” business decision to sell the debt to them for much less than he bought it for (well, presumably - I actually don’t know the details other than a non-profit was involved and it helps explain why there was no tax due for the debtors). Oprah could not give away cars on her show as genuine gifts, as the giveaway gave her a lot of publicity.
Employers are generally allowed to offer employees fringe benefits that involve use of employer services or low cost employer goods, but there are restrictions. Employers cannot sell their goods to employees at less than cost without the difference being income to the employee. Employers providing services for their employees must incur at most a de minimis additional cost for providing the service; think of airline employees getting free flights in seats that would otherwise be unused. Technically there is slightly more fuel being consumed, but it’s minor comparatively. Likewise, you’re allowed to use your employer’s copier without having to recognize income even if the employer leases the machine and pays by the copy. “De Minimis” tends to mean that it’s just absolutely not worth anyone’s time and effort to keep track of it; even if it does add up over a long period, the effort put into keeping track would be entirely disproportionate to the amounts involved.
So now you’re offered a deal of a lifetime by a game show. You are, in some sense, their employee as a contestant (maybe a contract worker or whatever) so if they provide you goods at less than their cost of the item, you must be taxed on the cost of the goods to the show (less the amount you paid), exactly as was described previously for TPIR. This even extends to stock options. There tends to be three ways to profit from stock options: The stock goes up in value after you exercise the option and before you sell, the stock goes up in value after the option is offered and before you exercise it, and the option is offered at a lower price than market value. The latter of these is always ordinary income immediately, as they are offering something at less than “cost”. For completeness, the first of the three is always capital gain like any stock buy and sale, but there are numerous requirements involved for the second source of income to be treated as capital gain instead of ordinary income, something I researched once and don’t remember the details of.
Also keep in mind that the tax authorities generally have the ability to look beyond the notional legal structure of a transaction and assess tax on a transaction that is in essence one that is taxable. Related-party transactions are often closely scrutinized. You can be forced to recognize interest income on a no-interest loan if the amount is large enough, so you can’t get away from some sort of tax by calling the 100 million you give your son a “loan” instead of a “gift” that would incur gift tax. If you sell your business to your son on a installment basis, you will need to charge a minimum rate of interest. We just had a client do that recently, and the installment basis wasn’t a regular amortization schedule but was just a percentage of revenue until it was paid off, paid whenever they got around to it. We had to make up our own irregular amortization table to calculate how much interest the father would have to recognize as income.