The IRS requires that you pay taxes on the fair market value (FMV) of a prize not on the "APPROXIMATE" retail value (ARV).
On any prize you win, you must document the lowest price at time of receipt of the prize of it's true retail value. On jewelry, you must first have the item appraised with the appraisal documented.
If the sponsor supplying the prize does not reflect the true value of a prize won on the 1099 submitted to the IRS, you can do one of two things. You can request the sponsor change the 1099 reflecting the true value of the prize or you can submit the true value of the prize as "Other Income" on your tax forms with backup documentation of true value.
As with anything else in life, an individual is responsible for knowing all the ins and outs and responsibilities of any undertaking.
At least you will be prepared for reporting any future prizes!
There are many other people who have made the same mistake.
