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LOL!!! Of course it's taxed!! And so are 'gifts' for that matter. To my knowledge, the only money you can recieve tax free is punitive damages from a lawsuit, and life insurance settlements. If your rich uncle decides he really likes you and wants to give you a new Mercedes for Christmas, then you better believe you're going to be paying the tax on it as if it were income. Last summer I won a pretty sizeable amount at a dog track in FL. I didn't even get out of that place without first turning over the tax portion directly to the IRS on the spot. Silly citizen, do you really think Dasshole and Gimphardt are going to let you out of a windfall tax free???

Gambling winnings are taxed (woo and yay to your puupydog prize) but I was wondering if a reward was viewed as earned income.

FWIW...
DH is a lawyer. His clients pay no tax on settlements and judgements won in personal injury tort claims... I myself was clobbered in an auto accident, and the settlement of the personal injury suit I filed was not taxable. Good thing, because most of it went to pay my enormous medical bills.

Gifts aren't taxed under some circumstances....
My inlaws have given DH and me cash gifts over the years, no tax applied. If they gave me a Mercedes (I wish) I would not have to pay tax on it. They would have to pay gift tax for its value over the yearly gift limit ($20,000). But I would only have to pay the "you don't really own your car" personal property tax. No income tax would be due the IRS.