Hypothetical question about gambling earnings?

Question

A person wins a motor vehicle playing a slot machine in a casino. . The winner has the option of taking the new vehicle or a cash payment. The cash payment is the wholesale price of the vehicle that amounts to about 30 percent less than the retail sales value of the car.

Question # 1. If the winner takes the cash option, does the winner report the gross gambling earnings as the cash?
wholesale value of the car or the retail sales price of the new vehicle for U.S. Federal Income Tax purposes.

Question # 2. If the winner filled a Federal Income Tax form an reported the gambling earnings as the retail sales value of the vehicle, but later found out that IRS regulations requited reporting the whole value, can the winner file an amended tax return for over payment of taxes.

Question # 3. What period of time does the winner have to file an amended tax return should that be the situation?

Please give site of source of answer material if possible.

Thank you

Answer 1

Answer #1. If the winner takes cash, they report the cash payment received.

Answer #2. If the winner overstated the amount won they can file an amended return and receive an overpayment of tax back.

Answer #3. A taxpayer has three years from the due date of the return or two years from the date the tax was paid, whichever is later, to amend the return.

Sources you can check at irs.gov
Pub 17: What is income
Instructions for Form 1040X.

Answer 2

You should receive a W-2G from the casino. If you took the cash that will be the amount on the W-2G. If you take the car they should place the amount at the Fair Market Value (FMV). They may use the amount that they paid for the vehicle or its retail price as the amount. What ever amount they report is the amount to use unless you have compelling information to disprove that amount. Since you should be using the W-2G amount there should not be any reason to amend your return but you would be allowed to do so for the last three years if your refund would be greater with the new information. If you would owe more tax due to an error you must amend all errant returns back to the beginning of income tax (1913) if you have been filing that long.