Rev. Ruling 70-389
Advice has been requested as to the applicability of Revenue Ruling 70-14 to a cigarette promotion contest.
Under the proposal, prizes of two values would be awarded to contestants who achieve the highest scores. A specified number of the highest scorers would each win a prize of one value, and a specified number of the next highest scorers would each win a less valuable prize. Tied contestants would be given the opportunity to enter as many as three similar consecutive contests to break the ties. If ties still remain after this, duplicate prizes would be awarded regardless of the number of winners. There would be separate tie-breaker contests for each prize level.
Some of the components necessary to participate in the contest would be included with packages of cigarettes. Contestants could by mail trade any of these components not needed for desired ones.
This contest is different form the game considered in Revenue Ruling 70-14 in that all prizes would not be of the same value and winners would be determined by the contestants' scores. However, the effect is essentially the same since the winners and size of the prizes would be determined by the skills of the contestants and not by chance. In applying the principles expressed in Revenue Ruling 70-14, this contest has been determined not to be a lottery.
Accordingly, materials relating to this contest are not prohibited by section 5723(c) of the Internal Revenue Code of 1954 from being associated with packages of tobacco products.
Revenue Ruling 70-14 is hereby amplified.
26 U.S.C. 5723; 27 CFR 270.211