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Faculty Post

Why You Don’t Want the Nobel Prize
by Professor Bridget J. Crawford

Audrey RogersFrench writer Jean-Paul Sartre famously turned down the Nobel Prize for Literature in 1954.  Vietnamese leader Le Duc Tho refused the Nobel Prize for Peace in 1973. Each had philosophical or ethical reasons for declining the honor. Sartre claimed a need for artistic independence, and Tho cited a lack of meaningful peace in Vietnam. When it was announced in 2011 that Dr. Ralph Steinman had won that year’s Nobel Prize in Medicine, his family should have considered a similar refusal, but (admittedly) for far less high-minded reasons. The tax bill will be big. In fact, the tax bill for Dr. Steinman’s heirs will be bigger than any other past, present or future laureate’s. What makes Dr. Steinman’s case so unusual? He died before he could collect the prize. That created an unusual tax problem that causes the prize money to be subject to taxation at particularly high rates.

At the time the prize committee decided to award the prize to Dr. Steinman, the committee members were not aware of Steinman’s death three days earlier. According to the rules of the Nobel Foundation, "[w]ork produced by a person since deceased shall not be considered for an award. If, however, a prize winner dies before he has received the prize, then the prize may be presented."1 According to press reports, though, the Nobel Committee decided pay the prize money to Dr. Steinman’s “heirs,” despite the rule.2 As a technical, legal matter, the payment likely will be made to his estate. Dr. Steinman’s heirs will receive a passive right to income (i.e., the prize money), and not property itself, and only because Dr. Steinman is not alive to receive it. There is a strong chance that the Internal Revenue Service will seek to treat this as “income in respect of a decedent,” which is just about the worst kind of income to have, from a tax perspective.

Had Dr. Steinman survived to receive the award, he would have been required to pay income tax on it. The value of the Nobel Prize is 10 million Swedish crowns,3 or about $1.46 million dollars. Dr. Steinman shared the prize one-half with two other scientists, so his share is worth approximately $730,000, and the income tax bill would have been (roughly) $260,000 in tax on that prize. But because of the voluntary payment by the Nobel Committee, and the likely characterization of the payment as “income in respect of a decedent,” Dr. Steinman’s heirs may face a tax bill that might be double that amount. 

Is this result fair? Maybe not. But it’s unlikely that the tax law will change to address such a narrow situation. As a practical matter, this is acceptable. The tax law provides no disincentive to those who do the daily work to achieve peace, justice, scientific breakthroughs, and artistic excellence. Extraordinary human beings – many of them our alumni, students, colleagues, friends, neighbors, and family members – will continue to do extraordinary work, without a thought of the Nobel Prize. And at least for tax reasons, you wouldn’t want it anyway.

 

Read Professor Crawford’s complete tax analysis of the 2011 Nobel Prize in Medicine here: "The Tax Man Wins the Nobel Prize," 133 Tax Notes 1421(2011) (co-author with Jonathan G. Blattmachr) or online at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1985690.



[2] Lannin and Shanley, supra note 2.

[3] The Nobel Prize Amounts, Nobelprize.org. Oct. 8, 2011, http://www.nobelprize.org/nobel_prizes/about/amounts.html