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.
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.
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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