What would the taxes be if I won the Saint Jude Dream home contest in West Virginia?

Question by P N: What would the taxes be if I won the Saint Jude Dream house contest in West Virginia?
I consider the value on the home is $ 450,000 or you can take a $ 200,000 cash prize instead. I believe the federal gift tax that you would have to pay is 45% of the $ 450,000 = $ 202,500 or $ 90,000 for the money. My other question is how much would State taxes be? Am I correct in thinking I’m not gonna win anything and just be liable for a lot of taxes?
They sold tickets that expense $ 100 each and every.

Best answer:

Answer by Spock (rhp)
the gift tax isn’t what’ll get you — it really is the revenue tax.

winning a contest or lottery is ordinary revenue to the extent of the actual cash value of the prize … $ 200,000 in this case.

So, if you win, your earnings in the year you win will be $ 200,000 hogher than you’d previously been planning.

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gift tax is one thing that the giver pays, not the person who receives, due to the fact the gift is assumed to be a way of evading the inheritance [estate] tax.

BUT — contests and lotteries are not gifts — you have to do one thing to enter and what ever that is counts as operate, effort, or worth contributed. And thus, the prizes are taxable revenue.

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Comments

  1. Judy says:

    There would be no gift tax, but there would be income tax. The amount would depend on your other income for the year, your filing status, and a few other things, but would be somewhere around a third of the prize for federal income tax, plus maybe state tax depending on where you live.

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