Win Car, Owe Tax?


D

Dan

If someone wins a car on a gameshow, is this treated as a
taxable event or does it fall under a gift and hence not
taxable?

TIA,
Dan
 
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J

Jonathan Kamens

Dan said:
If someone wins a car on a gameshow, is this treated as a
taxable event or does it fall under a gift and hence not
taxable?
Taxable event.

When Oprah gave cars to everyone in her studio audience,
they were actually allowed to choose whether to (a) take the
car and pay taxes on it, (b) forfeit the prize, or (c) sell
the car immediately and pay the taxes out of the sale
proceeds.

See this article about it that ran in the WSJ at the time:
<http://www.opinionjournal.com/taste/?id=110005662>.

The WSJ ran a more recent article about this issue, which
isn't available for free from their Web site but is
available for free from other newspapers that ran the wire
story, e.g.: http://www.post-gazette.com/pg/05187/533668.stm
 
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A

Arthur Kamlet

Dan said:
If someone wins a car on a gameshow, is this treated as a
taxable event or does it fall under a gift and hence not
taxable?
Taxed as a prize, reported on Form 1040 Line 21, "Prizes &
Awards."

If you can demonstrate the amount they show is too high, by
newspaper ads, etc, you can claim a lower amount that you
can prove is the true value of the new car.

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
 
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R

Rich Carreiro

Dan said:
If someone wins a car on a gameshow, is this treated as a
taxable event
Yes.

or does it fall under a gift and hence not taxable?
No.

But do some legwork and see what the car is really selling
for. The gameshow will probably claim the car is worth
MSRP (to get a bigger deduction for themselves), which is
likely unfavorable to you.
 
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H

Harlan Lunsford

Dan said:
If someone wins a car on a gameshow, is this treated as a
taxable event or does it fall under a gift and hence not
taxable?
Taxable event.

YOu will get a 1099 form end of year showing the value THEY
put on the car. When you get the car, take it immediately
to a dealer , several dealers in fact, and get written
opinions on actual selling price, which as we both know, is
NOT MSRP. Also look in the newspaper for prices of comparable
vehicles and document your prize. You'll be glad you did,
come tax time.

ChEAr$,
Harlan Lunsford, EA n LA
 
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P

Paul A Thomas

Dan said:
If someone wins a car on a gameshow, is this treated as a
taxable event or does it fall under a gift and hence not
taxable?
It's taxable as a prize or award. Generally goes to Line 21
- Other income.
 
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D

David Woods

Dan said:
If someone wins a car on a gameshow, is this treated as a
taxable event or does it fall under a gift and hence not
taxable?
How in ANY definition of the word could a prize from winning
be construed as a gift?
 
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J

JMc

If someone wins a car on a gameshow, is this treated as a
taxable event or does it fall under a gift and hence not
taxable?
It's subject to tax.
 
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D

D.F. Manno

Dan said:
If someone wins a car on a gameshow, is this treated as a
taxable event or does it fall under a gift and hence not
taxable?
It's not a gift, it's taxable income to the winner.

According to SCOTUS, a gift ³proceeds from a Œdetached and
disinterested generosity,¹ ... Œout of affection, respect,
admiration, charity or like impulses.¹² [Commissioner
v.Duberstein, 363 U.S. 278, 285 (1960)] The producers aren't
giving away cars out of the goodness of their hearts.

--
D.F. Manno | (e-mail address removed)
"As democracy is perfected, the office represents, more and
more closely, the inner soul of the people. We move toward a
lofty ideal. On some great and glorious day the plain folks
of the land will reach their heart's desire at last, and the
White House will be adorned by a downright moron." - H. L.
Mencken, in the Baltimore Sun, July 26, 1920
 
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H

Herb Smith

Dan said:
If someone wins a car on a gameshow, is this treated as a
taxable event or does it fall under a gift and hence not
taxable?
Fully taxable, at FMV, at your highest marginal tax bracket.
If you can substantiate the FMV as being less than the MSRP
shown on the 1099 your receive, then that is the value to
claim for taxation.
 
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D

David Samuel Barr

Dan said:
If someone wins a car on a gameshow, is this treated as a
taxable event or does it fall under a gift and hence not
taxable?
It is *not* a gift, and is fully taxable.

The value claimed by the company which provided the car to
the game show will be reported to you on a 1099-MISC under
"Prizes and Awards" and you must report that amount on your
federal income tax return on Line 21, "Other Income" (and
the corresponding line of your state income tax return).
Note though that, like most such prizes, the 1099 reported
value probably will be substantially higher than the fair
market value, but you can report a lower FMV if you can
substantiate it to the IRS's satisfaction.

Not only will you be liable for income tax but for sales tax
as well (and if they still do things in California the way
they used to, there likely will be a Franchise Tax Board
representative backstage who will require you to fork over a
cheque for the sales tax then and there before you can take
title to the car).
 
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N

Norma Desmond

How in ANY definition of the word could a prize from
winning be construed as a gift?
that begs the question. The IRC could just as easily be
written to state that such prizes are not to be treated as
income and subject to income tax. But, as other posters
have stated in their helpful answers, it is not, and thus
such a prize is subject to income tax.
 
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B

Bernard S

It's not a gift, it's taxable income to the winner.

According to SCOTUS, a gift ³proceeds from a Odetached and
disinterested generosity,¹ ... Oout of affection, respect,
admiration, charity or like impulses.¹² [Commissioner
v.Duberstein, 363 U.S. 278, 285 (1960)] The producers aren't
giving away cars out of the goodness of their hearts.
I have known that prozes are taxable and that you can can
refute an excess value. I would like to know if there is a
form to report the erroneous value other than an attachment
of explanation on the tax return. I would analogize this to
a nominee 1099 not that I am saying that would be the proper
form. Do any of the experienced tax preparers have such a
suggstion?

Thank you
 
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T

TaxSrv

Rich Carreiro said:
.... The gameshow will probably claim the car is worth
MSRP (to get a bigger deduction for themselves), which is
likely unfavorable to you.
The game show would be a business with adequate accounting
records. There's no way to claim a deduction computed like
that w/o disclosing it to IRS on Form 1120, Sch M.

Fred F.
 
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L

LoTax

Rich said:
.... The gameshow will probably claim the car is worth
MSRP (to get a bigger deduction for themselves....
I'm wondering how the gameshow would get a larger deduction
by claiming a higher FMV for the car... Anyone?
 
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L

Lanny K Williams CPA

LoTax said:
Rich Carreiro wrote:
I'm wondering how the gameshow would get a larger deduction
by claiming a higher FMV for the car... Anyone?
Well, I don't know how the game show would get the higher
deduction but they do have to report the prize at FMV.

On the other hand, I do know that game shows play games with
their 1099s. A few years ago, a client won some $30,000 on
Jeopardy. The 1099 was issued for the year in which he won.
However, that actual check was dated December 26 but the
envelope in which is was sent was postmarked 1/4 of the
following year! We reported the income on the return for
the later year.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans
 
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F

Frank S. Duke, Jr.

Lanny said:
....
On the other hand, I do know that game shows play games with
their 1099s. A few years ago, a client won some $30,000 on
Jeopardy. The 1099 was issued for the year in which he won.
However, that actual check was dated December 26 but the
envelope in which is was sent was postmarked 1/4 of the
following year! We reported the income on the return for
the later year.
This is a question that appears regularly on the CPA exam.
If they wrote the check and let it sit on the desk until the
new year before mailing, it is a new year payment. If they
mailed it (left their control) in the old year but it did
not get postmarked until the new year, it is an old year
payment. With a post mark of 1/4, I guess it depends on how
the weekend fell as to which one was more credible. If it
was mailed on Friday, 12/31 late in the day, it might not
have been picked up until Monday, 1/3 and if it was actually
processed by the distribution center after midnight, it
might have a 1/4 postmark and have been actually mailed on
12/31.

All freely provided advice guarantee correct or double your
money back

Frank S. Duke, Jr. CPA
Cincinnati, OH USA
 
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A

A.G. Kalman

David said:
Dan wrote:
It is *not* a gift, and is fully taxable.

The value claimed by the company which provided the car to
the game show will be reported to you on a 1099-MISC under
"Prizes and Awards" and you must report that amount on your
federal income tax return on Line 21, "Other Income" (and
the corresponding line of your state income tax return).
Note though that, like most such prizes, the 1099 reported
value probably will be substantially higher than the fair
market value, but you can report a lower FMV if you can
substantiate it to the IRS's satisfaction.

Not only will you be liable for income tax but for sales tax
as well (and if they still do things in California the way
they used to, there likely will be a Franchise Tax Board
representative backstage who will require you to fork over a
cheque for the sales tax then and there before you can take
title to the car).
Until July 1, 2006, a CA resident pays use tax when he
registers a vehicle acquired out of state if brought into CA
within 365 days of acquisition. CA will provide a credit for
any sales or use tax paid to the other state. Unless
changed, the law reverts back to 90 days 7/1/06.
 
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L

Lanny K Williams CPA

This is a question that appears regularly on the CPA exam.
If they wrote the check and let it sit on the desk until the
new year before mailing, it is a new year payment. If they
mailed it (left their control) in the old year but it did
not get postmarked until the new year, it is an old year
payment. With a post mark of 1/4, I guess it depends on how
the weekend fell as to which one was more credible. If it
was mailed on Friday, 12/31 late in the day, it might not
have been picked up until Monday, 1/3 and if it was actually
processed by the distribution center after midnight, it
might have a 1/4 postmark and have been actually mailed on
12/31.
I will admit I don't recall just what years were involved
but 1/4 was not the first working day of the new year.
Also, note that the date on the check was 12/26, indicating
that the check did sit on someone's desk for a few days
before mailing.

I might add that the taping of the show took place in August
or September and was broadcast later in the year -- October
or November.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans
 
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