6 ms·

> There are other types of car giveaways run by more legitimate parties (charity raffles, event promotions) that do deliver the goods — but if you win, you’re l

by chiph 4y ago

> There are other types of car giveaways run by more legitimate parties (charity raffles, event promotions) that do deliver the goods — but if you win, you’re liable to pay a hefty gift tax. I don't think it's a gift tax, but ordinary income tax. A coworker won a living room sofa set on a game show, and the staff were waiting with a 1099 for her as soon as she stepped off the stage. The IRS says you need to pay tax based on the fair market value, but the shows will list the prize at it's full retail price. So if you should happen to (and you won't) win the Acura, you'll owe 25% or more on it. Plus any state income tax. I'm not sure when the IRS actually wants their money, but a safe assumption would be "soon". Perhaps by the next quarterly estimated-tax date.

ggm 4y ago
In Australia, the thing called an "art union" used to be how to raise money for charity, and the prize was often a home, and they really exist, and people did win and live in them, and some of them were classics of the low spot of the 60s and 70s, shag-pile carpet, sunken entertainment pit, volcano-stone fireplace... They still take place. I suspect the buildings have moved with the (architectural) times.
- michaelhoney 4y ago
  I think you mean the apogee of architectural refinement. I would love an entertainment pit.
  - ggm 4y ago
    https://www.imdb.com/title/tt5473090/ https://www.imdb.com/title/tt5473090/ (swingin' safari: 2018) is a coming-of-age film set in Australia, which includes an exploding whale, Guy Pearce, Kylie Minogue, and a beautiful shag-pile den with sunken pit. It was shot on the GC.
- bombcar 4y ago
  In the US there is (was) some way of using the home raffle thing to bypass capital gains tax but I’m unclear on the details.
- jimmux 4y ago
  They certainly aren't as common as they used to be, but I still see them. I think maybe Royal Life Saving Society still do it? Gold Coast apartments are typical properties now. I'll never enter though - not since they sold my details and I got spam calls for years.
nulbyte 4y ago
> I don't think it's a gift tax, but ordinary income tax. Correct. Prize winnings are taxed at your ordinary income tax rate. The gift tax applies to gifts, not prize winnings, and even then, the giver pays it, if applicable.
onion2k 4y ago
Oprah's famous "You get a car! And you get a car! And everyone gets a car! " show landed each audience member who got a 'free' car with a $6000 tax bill. https://www.history.com/this-day-in-history/oprah-gives-away-nearly-300-new-cars https://www.history.com/this-day-in-history/oprah-gives-away...
- Hamuko 4y ago
  To be fair, $6000 for a brand new car ain't so bad, even if it was a Pontiac.
  - onion2k 4y ago
    The problem was that the people in the audience all needed cars and couldn't afford them. They didn't have money. Finding $6000 to keep a gift when you're broke is a hard problem.
    - Hamuko 4y ago
      IRS does offer payment plans at least for some types of tax debt. But really, if you need a car but are unable to get $6000 to obtain one, I'm not sure if you have that much better luck in the used car market, since a car would still require some thousands that you either need to have at hand, or get a loan to. If you can't get a loan for a $6000 new car, can you get a loan for a $3000 used car?
- tayo42 4y ago
  Could they have offered to pay the tax? Or would that then trigger more tax, creating some kind of infinite loop of gifts and taxes?
  - Denvercoder9 4y ago
    Offering to pay the tax does trigger more tax; but as the added tax is less than what you add to the price, the total amount converges (as long as the tax rate is less than 100%). To have the recipient end up with a net payment N after taxes you've to pay N/(1-r), with r being the tax rate. With a 25% tax rate and car value of $28,500; to make it a tax-free gift Oprah should've paid an additional $9,500.
SkeuomorphicBee 4y ago
> I don't think it's a gift tax, but ordinary income tax. Is it simply counted on top of (added to) your existing income, and therefore progressive? If I'm unemployed, with no income at all, would I pay very little to no tax on such a gift? Or gifts are a special case with a separate rate?
- chiph 4y ago
  Yes, the normal progressive tax brackets apply. So if Oprah gives you a car worth $40k, and you have no other income that year, you will take the standard deduction and pay 12% on what's left. Don't forget to pay your state income tax and also the DMV to title & register the car. Getting free stuff isn't cheap!

by chiph 4y ago

ggm 4y ago

In Australia, the thing called an "art union" used to be how to raise money for charity, and the prize was often a home, and they really exist, and people did win and live in them, and some of them were classics of the low spot of the 60s and 70s, shag-pile carpet, sunken entertainment pit, volcano-stone fireplace... They still take place. I suspect the buildings have moved with the (architectural) times.

michaelhoney 4y ago
I think you mean the apogee of architectural refinement. I would love an entertainment pit.
- ggm 4y ago
  https://www.imdb.com/title/tt5473090/ https://www.imdb.com/title/tt5473090/ (swingin' safari: 2018) is a coming-of-age film set in Australia, which includes an exploding whale, Guy Pearce, Kylie Minogue, and a beautiful shag-pile den with sunken pit. It was shot on the GC.
bombcar 4y ago
In the US there is (was) some way of using the home raffle thing to bypass capital gains tax but I’m unclear on the details.
jimmux 4y ago
They certainly aren't as common as they used to be, but I still see them. I think maybe Royal Life Saving Society still do it? Gold Coast apartments are typical properties now. I'll never enter though - not since they sold my details and I got spam calls for years.

nulbyte 4y ago

> I don't think it's a gift tax, but ordinary income tax. Correct. Prize winnings are taxed at your ordinary income tax rate. The gift tax applies to gifts, not prize winnings, and even then, the giver pays it, if applicable.

onion2k 4y ago

Oprah's famous "You get a car! And you get a car! And everyone gets a car! " show landed each audience member who got a 'free' car with a $6000 tax bill. https://www.history.com/this-day-in-history/oprah-gives-away-nearly-300-new-cars https://www.history.com/this-day-in-history/oprah-gives-away...

Hamuko 4y ago
To be fair, $6000 for a brand new car ain't so bad, even if it was a Pontiac.
- onion2k 4y ago
  The problem was that the people in the audience all needed cars and couldn't afford them. They didn't have money. Finding $6000 to keep a gift when you're broke is a hard problem.
  - Hamuko 4y ago
    IRS does offer payment plans at least for some types of tax debt. But really, if you need a car but are unable to get $6000 to obtain one, I'm not sure if you have that much better luck in the used car market, since a car would still require some thousands that you either need to have at hand, or get a loan to. If you can't get a loan for a $6000 new car, can you get a loan for a $3000 used car?
tayo42 4y ago
Could they have offered to pay the tax? Or would that then trigger more tax, creating some kind of infinite loop of gifts and taxes?
- Denvercoder9 4y ago
  Offering to pay the tax does trigger more tax; but as the added tax is less than what you add to the price, the total amount converges (as long as the tax rate is less than 100%). To have the recipient end up with a net payment N after taxes you've to pay N/(1-r), with r being the tax rate. With a 25% tax rate and car value of $28,500; to make it a tax-free gift Oprah should've paid an additional $9,500.

SkeuomorphicBee 4y ago

> I don't think it's a gift tax, but ordinary income tax. Is it simply counted on top of (added to) your existing income, and therefore progressive? If I'm unemployed, with no income at all, would I pay very little to no tax on such a gift? Or gifts are a special case with a separate rate?

chiph 4y ago
Yes, the normal progressive tax brackets apply. So if Oprah gives you a car worth $40k, and you have no other income that year, you will take the standard deduction and pay 12% on what's left. Don't forget to pay your state income tax and also the DMV to title & register the car. Getting free stuff isn't cheap!