I suspect most contests are a clever scam for free advertising. The sponsor sends a grossly overvalued 1099 to the recipient and deducst that amount from its income. But then it pays considerably less to actually provide the prize. In fact, since the advertising of the prize often mentions the name of a hotel, resort, airline, etc., that is not the provider of the prize, that entity may be offering the prize for free to the provider of the prize.