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What will the tax be if I win a contest where they pay $100,000 as a lump sum in the first year and $36,000 each year for the next 25 yrs (assuming I live that long) and will the tax be owed in the first year or during each year a payment is made to me? The details of the contest are here ... http://milliondollar.cnbc.com/

2007-02-28 05:29:55 · 5 answers · asked by C J 1 in Business & Finance Taxes United States

5 answers

The tax would be due each year on whatever payments you received in that year. The amount would depend on any other income you have, and also on your filing status, dependents, adjustments, deductions and credits, so it's not a question anyone can answer here. But the tax would be the same as if you made that amount as an employee - it's ordinary income.

2007-02-28 07:11:31 · answer #1 · answered by Judy 7 · 0 0

Any contest winnings like this are subject to the "gift tax" which can be anywhere from 50% to 65%.
If I were to win a contest like that and be given the choice of lump sum or annuity, I'd take the lump sum total payout all at once. That way the % is taken straight off the top and I don't have to worry about it anymore. Also, whatever they list as the lump sum payout is what you actually get free and clear.
If you add up all the annuity payments with the initial $100K and then $36K every year for 25 yrs, you'll come up with $1 million. That means that each one of those payments will only get to you as 35% - 50% of that amount. You will actually receive that much, but then when you file taxes, you'll have to make sure that you have up to 65% of that amount set aside to pay the taxes, so just count on 35% and you'll be safe. On amounts that big, the IRS does not play and you could wind up in prison in no time.
Let them have theirs up front and take the balance!!

2007-02-28 05:46:45 · answer #2 · answered by Goyo 6 · 0 2

Figure about 30% of the total, each year, across federal, state, local taxes, and SSI+Medicare.

.

2007-02-28 05:33:54 · answer #3 · answered by non_apologetic_american 4 · 1 0

Taxes will be asses ed in the year they are distributed to you / So 100 000 plus your other income minus deductions yada yada first year.

And I plan to win so why are you even asking ??

2007-02-28 05:37:04 · answer #4 · answered by Rick F 2 · 1 1

figure about half.

2007-02-28 05:38:33 · answer #5 · answered by Jack Chedeville 6 · 0 1

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