You may have heard of the giveaway of a $28,000 Pontiac to all 276 audience members at the 19th season premiere of Oprah show. She said Ponitac would be paying all the taxes on the car. While Pontiac will pay the sales tax and other fees, Pontiac is apparently not going to pay the income taxes on the $28,000 gift. (That's not a tax on the car, that's a tax on you.) Depending on your marginal tax rate, this could increase your tax liability by $7,000.

My story: When I was in high school and college I worked summers at a car dealership doing odd jobs like washing cars, detailing new deliveries, etc. Every so often we'd have one of those cheesy car giveaways. I remember one in particular. We we giving away a new Z-28 Camaro. On the morning of the promotion, the boss pulls in the Z and another nondescript Camaro (not a Z-28 version) and tells me to detail them up. I asked why he wanted the second car done. He said "Oh that's the one we're really giving away. ;-)" It turns out that after they "give away" the Z they then go on to explain the income tax implications to the lucky winner. They then proceed to talk the winner into selling the fancy car back to the dealership and taking the less valued car in its place. The difference in price between the two cars is then given to the winner to pay their taxes. Sure they don't get the fancy car they'd expected but at least they come out even on the day after taxes.

This is a great example of deadweight loss. The winner not only lost the money she has to pay in taxes, she also lost the Z-28 and had to settle for the regular car.