scratch ticket question

Discussion in 'US Taxes' started by Sir Archibald Stanton 3rd, Sep 24, 2003.

  1. My best friend just won $10,000 on a scratch ticket.
    <massachusetts> He asked me if I would cash it for him and receive a
    small fee plus having the benefit of paying in $3000 in taxes. Ahem, I
    told him of course I wouldn't that may be illegal so of course I said
    no but now he's peaked my interest. Hypothetically, would this be a
    positive step for me to take? Are the laws regarding scratch tickets
    pretty much the same state to state? Of the 10 grand, 27% is taken
    right off the top for the feds and another 5% for the state. I've also
    heard that with gambling losses and gains can cancel each other out.
    Thus, if one wins $10000 but then has $10000 in losing tickets it
    evens out. Does this kind of deduction invite an audit? Just curious.
    Any advice would be appreciated.

    arch
     
    Sir Archibald Stanton 3rd, Sep 24, 2003
    #1
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  2. Criswell The Psychic Weatherman wrote:

    > Sir Archibald Stanton 3rd wrote:
    >
    > > My best friend just won $10,000 on a scratch ticket.
    > > <massachusetts> He asked me if I would cash it for him and receive a
    > > small fee plus having the benefit of paying in $3000 in taxes. Ahem, I
    > > told him of course I wouldn't that may be illegal so of course I said
    > > no but now he's peaked my interest. Hypothetically, would this be a
    > > positive step for me to take? Are the laws regarding scratch tickets
    > > pretty much the same state to state? Of the 10 grand, 27% is taken
    > > right off the top for the feds and another 5% for the state. I've also
    > > heard that with gambling losses and gains can cancel each other out.
    > > Thus, if one wins $10000 but then has $10000 in losing tickets it
    > > evens out. Does this kind of deduction invite an audit? Just curious.
    > > Any advice would be appreciated.
    > >
    > > arch

    >
    > The question that could be asked at an audit is, "Do you have those
    > $10,000 in losing tickets?" and if you say yes, you will be asked to show
    > them. If you say no, or refuse to show them, the auditor will almost
    > certainly deny the deduction.
    >
    > The $3000 is withholding, not taxes. You add the $10,000 in income, and
    > the deduction subtracted on Schedule A, subject to the limitations and
    > restrictions of the deduction, you will calculate the total tax, and
    > subtract any withholdings already withheld from wages, from this ticket,
    > etc. In this case, even though the 1099 would be in your name, you are
    > not getting income from the ticket, but you are receiving the fee he is
    > paying you and he is getting the income from the ticket, even though he's
    > trying to get around it.


    These are issues a good auditor will be familiar with. If you lie about
    giving the money to your friend, you'd better have those $10,000 in losing
    lottery tickets. If you tell the truth, you've just set your friend up for
    an audit.
    --
    "A belief is not merely an idea the mind possesses;
    it is an idea that possesses the mind." Robert Bolton
    Criswell The Psychic Weatherman
    E-mail is munged. Clip coupons to respond.
     
    Criswell The Psychic Weatherman, Sep 24, 2003
    #2
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  3. On Wed, 24 Sep 2003 21:24:55 GMT, Criswell The Psychic Weatherman
    <> wrote:

    >Criswell The Psychic Weatherman wrote:
    >
    >> Sir Archibald Stanton 3rd wrote:
    >>
    >> > My best friend just won $10,000 on a scratch ticket.
    >> > <massachusetts> He asked me if I would cash it for him and receive a
    >> > small fee plus having the benefit of paying in $3000 in taxes. Ahem, I
    >> > told him of course I wouldn't that may be illegal so of course I said
    >> > no but now he's peaked my interest. Hypothetically, would this be a
    >> > positive step for me to take? Are the laws regarding scratch tickets
    >> > pretty much the same state to state? Of the 10 grand, 27% is taken
    >> > right off the top for the feds and another 5% for the state. I've also
    >> > heard that with gambling losses and gains can cancel each other out.
    >> > Thus, if one wins $10000 but then has $10000 in losing tickets it
    >> > evens out. Does this kind of deduction invite an audit? Just curious.
    >> > Any advice would be appreciated.
    >> >
    >> > arch

    >>
    >> The question that could be asked at an audit is, "Do you have those
    >> $10,000 in losing tickets?" and if you say yes, you will be asked to show
    >> them. If you say no, or refuse to show them, the auditor will almost
    >> certainly deny the deduction.


    They'll be there.
    >>
    >> The $3000 is withholding, not taxes.


    Ahhh Ok. So basically it's the same as earning a $10000
    paycheck <gross> and then after deductions of $3200 receiving the net
    earnings. <$6800>

    >> You add the $10,000 in income, and
    >> the deduction subtracted on Schedule A, subject to the limitations and
    >> restrictions of the deduction, you will calculate the total tax, and
    >> subtract any withholdings already withheld from wages, from this ticket,
    >> etc. In this case, even though the 1099 would be in your name, you are
    >> not getting income from the ticket, but you are receiving the fee he is
    >> paying you and he is getting the income from the ticket, even though he's
    >> trying to get around it.

    >
    >These are issues a good auditor will be familiar with. If you lie about
    >giving the money to your friend, you'd better have those $10,000 in losing
    >lottery tickets. If you tell the truth, you've just set your friend up for
    >an audit.


    This is not happening. Im just wondering <read: hypothetical>
    how it works. Im also wondering if say John Doe makes $27000 a year.
    Could winning this ticket result in a new tax bracket b/c he now make
    $37000 for that year? I have a friend who goes the track a lot and he
    says there are guys who love to cash these kinds of tickets and do it
    for free <they cash nonwitholding winning tickets themselves for a
    fee usually 10%> because it gives them legitimate earned income along
    with with-holdings. I would never trust a stranger with that much
    $$$. Thanks for taking the time to attempt to clear up some things
    here. These things can be very confusing.

    arch
     
    Sir Archibald Stanton 3rd, Sep 24, 2003
    #3
  4. Sir Archibald Stanton 3rd wrote:

    > On Wed, 24 Sep 2003 21:24:55 GMT, Criswell The Psychic Weatherman
    > <> wrote:
    >
    > >Criswell The Psychic Weatherman wrote:
    > >
    > >> Sir Archibald Stanton 3rd wrote:
    > >>
    > >> > My best friend just won $10,000 on a scratch ticket.
    > >> > <massachusetts> He asked me if I would cash it for him and receive a
    > >> > small fee plus having the benefit of paying in $3000 in taxes. Ahem, I
    > >> > told him of course I wouldn't that may be illegal so of course I said
    > >> > no but now he's peaked my interest. Hypothetically, would this be a
    > >> > positive step for me to take? Are the laws regarding scratch tickets
    > >> > pretty much the same state to state? Of the 10 grand, 27% is taken
    > >> > right off the top for the feds and another 5% for the state. I've also
    > >> > heard that with gambling losses and gains can cancel each other out.
    > >> > Thus, if one wins $10000 but then has $10000 in losing tickets it
    > >> > evens out. Does this kind of deduction invite an audit? Just curious.
    > >> > Any advice would be appreciated.
    > >> >
    > >> > arch
    > >>
    > >> The question that could be asked at an audit is, "Do you have those
    > >> $10,000 in losing tickets?" and if you say yes, you will be asked to show
    > >> them. If you say no, or refuse to show them, the auditor will almost
    > >> certainly deny the deduction.

    >
    > They'll be there.
    > >>
    > >> The $3000 is withholding, not taxes.

    >
    > Ahhh Ok. So basically it's the same as earning a $10000
    > paycheck <gross> and then after deductions of $3200 receiving the net
    > earnings. <$6800>
    >
    > >> You add the $10,000 in income, and
    > >> the deduction subtracted on Schedule A, subject to the limitations and
    > >> restrictions of the deduction, you will calculate the total tax, and
    > >> subtract any withholdings already withheld from wages, from this ticket,
    > >> etc. In this case, even though the 1099 would be in your name, you are
    > >> not getting income from the ticket, but you are receiving the fee he is
    > >> paying you and he is getting the income from the ticket, even though he's
    > >> trying to get around it.

    > >
    > >These are issues a good auditor will be familiar with. If you lie about
    > >giving the money to your friend, you'd better have those $10,000 in losing
    > >lottery tickets. If you tell the truth, you've just set your friend up for
    > >an audit.

    >
    > This is not happening. Im just wondering <read: hypothetical>
    > how it works. Im also wondering if say John Doe makes $27000 a year.
    > Could winning this ticket result in a new tax bracket b/c he now make
    > $37000 for that year? I have a friend who goes the track a lot and he
    > says there are guys who love to cash these kinds of tickets and do it
    > for free <they cash nonwitholding winning tickets themselves for a
    > fee usually 10%> because it gives them legitimate earned income along
    > with with-holdings. I would never trust a stranger with that much
    > $$$. Thanks for taking the time to attempt to clear up some things
    > here. These things can be very confusing.
    >
    > arch


    Just because it's a regular practise doesn't necessarily make it legal. I
    understood that your post was a hypothetical, and that you didn't go through
    with the transaction. I was answering also for anyone considering the same
    thing.
    --
    "A belief is not merely an idea the mind possesses;
    it is an idea that possesses the mind." Robert Bolton
    Criswell The Psychic Weatherman
    E-mail is munged. Clip coupons to respond.
     
    Criswell The Psychic Weatherman, Sep 26, 2003
    #4
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