tax questions?

Question

i heard that if you won the lottery you had to give a high amount of your profit to the government, or if you had a company and you sold it you need to give a high amount of your profit to the government. is this true?

Answer 1

Your winnings from the lottery and earnings from the sale of a company are taxed on the amount that you won/earned. With a company, you could actually sell for a loss, and file a loss on the company.

Answer 2

First off, define "high." That's a relative term. The highest Federal income tax rate is 35%. At that rate you'd still be keeping the majority of your winnings.

Profit from the sale of a business is treated as capital gains. If you owned the business for over a year that's taxed as a long-term capital gain and attracts a 15% tax rate. I'd hardly call that a high rate of tax. And if your marginal tax rate was 15% or less, the tax rate would drop to 5%. That's hardly high in anyone's book.

Answer 3

When you win the lottery, it is treated like extra wage income and is taxed so. In other words, whatever tax bracket you are in, that will be the tax you pay. When you sel a business, as long as you own it for longer than a year, you will be taxed a maximum of 15% on only the PROFIT of the sale since it is a capital gain.

Answer 4

That depends on your definition of a high amount. Either is taxable income - the percentage depends on your total taxable income for the year. The percentage could be as high as 35% for federal, and some for state depending on your state.