Are the homeowners stuck with paying the 50% gift tax as if they won a Corvette on a game show? How do they afford the increase in their property taxes after the show has increased the value of their homes? These people couldn't afford to make the improvements themselves....that's why the show does it for them. But, that's JUST like winning money/prizes on a game show. You have to pay gift taxes on that stuff. How many families have had to sell the house because they couldn't afford the increased property tax due to the increased value of the house??
2007-11-05 14:26:05 · 5 answers · asked by skonk2 1 in Business & Finance ➔ Taxes ➔ United States
There was an article I read once on this speaking to at least one of your questions. The show leases the home from the owners and they take advantage of a tax law that allows the show to improve the property without the owner having to take the improvements into account in their income. From that perspective they pay not tax. From that perspective it is different then winning a prize on a game show and it is all about taking advantage of a tax law.
As for property taxes I would expect the owners are responsible unless ABC puts together something to pay for the increased taxes.
Keep in mind other things will increase - electric/gas/water/etc. bills probably all increase. I would think the family will have to take care of these things again, unless something is put together to pay for them.
2007-11-05 15:28:47 · answer #1 · answered by BHWMST 3 · 0⤊ 0⤋
Actually, the person giving the gift pays the gift tax, and that is only for amounts over $12,500 approx. Weird but true. It prevents people from liquidating their estates (or corporate incomes) to avoid estate taxes at death (or corporate taxes). Therefore, the homeowners are receiving a gift from another and would not be responsible for paying tax, which is the donor's responsibility. The game show is different than the makeover gifts because there you are talking about income tax, which is different from the gift tax issues described above. In your example, the Corvette is income received from playing where the improvements to the home would be characterized as a gift more than likely. It's a fine line, but that is how the authorities have ruled. However, if the homeowners performed any services etc for the makeover, then you have crossed into the income tax realm and they would have to pay tax. As to your point on the increased property taxes, you might be onto something there. The substantial improvements would increase the value, and therefore the taxes, but by how much is not known. Maybe the makeover tenant's ppt taxes are offset by the fact that they don't have to do as many repairs to their home anymore.
2007-11-05 17:25:58 · answer #2 · answered by Anonymous · 0⤊ 0⤋
These aren't gifts.
The producers are trying to pull a fast one by claiming these are leasehold improvements. They "rent" the houses and try to argue that all of the improvements are for the benefit of the show, not the home owner, who simply gets the improvements after the show is over with.
The IRS has said it isn't buying the argument and as show prizes, these are fully taxable to the recipient whether or not they get a 1099-Misc. (As a prize, the retail value is added to "other income" and can easily push the taxpayer into a higher tax bracket.) If the taxpayer doesn't report the amounts on their original tax return, they can be hit with penalties and interest when they are audited.
Clearly the winners aren't going to be so happy with these [crappy] upgrades after they pay the taxes on them. They can possibly argue that the items were overvalued, but ignoring the tax issue entirely could land them in court and jail with Survivor Winner "I thought CBS was paying the taxes" Richard Hatch.
2007-11-05 19:40:36 · answer #3 · answered by Anonymous · 0⤊ 0⤋
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2016-11-10 10:00:31 · answer #4 · answered by moscovic 4 · 0⤊ 0⤋
I'm Pretty sure ABC pays for that stuff.
2007-11-05 14:34:01 · answer #5 · answered by Anonymous · 0⤊ 2⤋