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Winning a car-tax question
Posted on 1/19/14 at 7:44 pm
Posted on 1/19/14 at 7:44 pm
What would be the tax implications in this scenario? You win a car in a contest. Pay taxes on the car and register the vehicle, then re-sell the car back to the dealership. Would you need to claim the money earned from selling the car back to the dealership on your taxes?
Note: The car was won in Mississippi and then registered/paid tax in Louisiana. Then sold back to dealership in Mississippi.
Note: The car was won in Mississippi and then registered/paid tax in Louisiana. Then sold back to dealership in Mississippi.
Posted on 1/19/14 at 7:58 pm to WhoGeaux
You're going to have to pay taxes on the value on that vehicle.
Posted on 1/19/14 at 8:24 pm to WhoGeaux
I would think you pay income tax on full amount, plus sales tax on full amount in state/parish of residency ?
Posted on 1/20/14 at 8:57 am to WhoGeaux
How did you win it? If you won it at a casino, they should give you a W-2G for the value of the car. You will claim this amount on your income taxes. When you sell it back to the dealership, your basis in the car is the amount from the W-2G plus the taxes and registration fees to Louisiana. If you sell it for more than that, then you must pay taxes on the gain. However, if you sell it for less than your basis, you can not claim a loss.
Posted on 1/20/14 at 10:47 am to CubsFanBudMan
quote:Not necessarily. If the car was won by winning a bet, then the winner will be issued a W-2G. If the car was the prize in a contest or drawing, then the winner will be issued a 1099-Misc.
How did you win it? If you won it at a casino, they should give you a W-2G for the value of the car.
quote:The reason for this is that the casinos have to get approval for contests from the regulators, and the regulators tend to insist the winner actually take title to the car. So the casino reports it in this manner to keep the regulators happy.
You will claim this amount on your income taxes. When you sell it back to the dealership, your basis in the car is the amount from the W-2G plus the taxes and registration fees to Louisiana. If you sell it for more than that, then you must pay taxes on the gain. However, if you sell it for less than your basis, you can not claim a loss.
However, just because the casino reports it in that fashion doesn't mean you have to. You can make a substance over form argument that your economic benefit from winning is the net cash you receive.
Posted on 1/20/14 at 11:15 am to Poodlebrain
quote:
However, just because the casino reports it in that fashion doesn't mean you have to. You can make a substance over form argument that your economic benefit from winning is the net cash you receive.
I agree with you there, but not sure how you would claim the "loss". If the full amount is not reported, a notice from the IRS is sure to follow. Would the loss be claimed on Sch D?
Posted on 1/20/14 at 11:52 am to CubsFanBudMan
quote:No, the income would be reported as other income on line 21 as "prize money see stmt." I would attach a statement that reported the prize amount per the 1099-Misc and a line item "expenses paid to collect the prize" with the net amount equaling what I reported on line 21.
I agree with you there, but not sure how you would claim the "loss". If the full amount is not reported, a notice from the IRS is sure to follow. Would the loss be claimed on Sch D?
Posted on 1/20/14 at 12:11 pm to WhoGeaux
Go to the fairgrounds and gather enough receipts showing a loss equal to the amount of the car you won
Posted on 1/20/14 at 12:34 pm to CorkSoaker
I read the fine print on car raffle the other day (New Orleans Zoo-to-Do) for a Lexus IS-300. It said you had to present a certified check within 5 days for the full amount of the tax, title and license which they estimated at 25% of the value of the vehicle. I guess that means you can't wait to settle up with uncle sam until the end of the year.
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