Final answer:
The statement is true; prizes and awards (except scholarships covered under §117) must be included in gross income per U.S. tax law.
Step-by-step explanation:
The question relates to the inclusion of the fair market value of prizes and awards in gross income for tax purposes. The statement is True. According to U.S. tax law, specifically under the Internal Revenue Code, the fair market value of prizes and awards must generally be included in the recipient's gross income. This rule applies if the prizes and awards are not exempted under other provisions such as §117, which pertains to the exemption for qualified scholarships.
For example, if you win a car in a raffle, the value of the car must be reported as income on your tax return. The fair market value is used to determine the tax liability associated with the prize or award.