My mom sent a disk of "The Price is Right", and one of the contestants had the possibility of winning 3 cars; one worth 14K, one worth 19K and one worth 23K. When asked what she would do with three cars, she said she would give one to her mother, one to her sister,and she would keep one. Assuming all are in a 20% tax bracket, who pays what taxes?
2007-10-27 11:28:08 · 3 answers · asked by ciamalo 3 in Business & Finance ➔ Taxes ➔ United States
The winner pays all of the income taxes on all 3 cars. The combined value is $56,000 and if the tax rate was 20% the winner would pay $11,200 in income taxes. (Actually, there is no 20% marginal rate, but that's a quibble.)
The two cars given away are treated as gifts. Since the value of them is all in excess of $12,000, a Gift Tax return must be filed. Most likely there won't be any Gift Tax due as the lifetime exclusion (currently $1,000,000) would cover her there.
The mother and sister would pay no income tax at all as gifts are not taxable to the recipient, but to the donor.
The persons registering the vehicles would be responsible for the sales taxes, not necessarily the winner.
This bears no similarity to the man who caught Barry Bonds' record breaking home run ball. The IRS had made NO attempt to collect ANY tax prior to his selling it. It would not be possible to determine the value of that ball due to the once-in-a-lifetime nature of the event. In the case of the cars won on The Price is Right, the value of the prizes was easily determined and therefore the tax would be due immediately.
2007-10-27 11:47:27 · answer #1 · answered by Bostonian In MO 7 · 2⤊ 0⤋
I believe they pay a tax in the state they won the money and in there home state . The state they won it in takes out what ever their earned income rates are then the winners have to file the winnings as earned income so they get hit again
2016-04-10 22:00:28 · answer #2 · answered by Anonymous · 0⤊ 0⤋
The person who won the prizes is responsible for the taxes. They may be required to pay the sales tax on the prizes as well. If it were me, I would have to sell the cars just to pay the taxes!
That's what happened to the guy who caught Barry Bonds' 756th home run ball. The IRS decided he had to declare the ball as "income" and had to sell it to pay the tax bill!
2007-10-27 11:35:53 · answer #3 · answered by crazydave 7 · 1⤊ 2⤋
While the recipient is the person responsible for the taxes, if it were my sister, I would offer to pay whatever tax was due on the car she gave me.
2007-10-27 14:05:28 · answer #4 · answered by Anonymous · 0⤊ 1⤋