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re: Raffle House controversy in St. Tammany.
Posted on 6/5/16 at 10:15 am to WhiteMandingo
Posted on 6/5/16 at 10:15 am to WhiteMandingo
quote:There are two activities to consider, winning the raffle and selling the house. If they are treated as separate events the results can be worse for the raffle winner than treating them as a single event. Rather than explain, I'll provide an example:
How do you figure the taxes on the house?
Raffle held 6/1/2016 for house with appraised value of $400,000. Winner sells house 6/2/2016 for $350,000.
Separate events - Winner recognizes $400,000 of ordinary income on 6/1/2016, and $50,000 of short-term capital loss on 6/2/2016. Result is winner taxed on $397,000 of income. Winner has $47,000 of short-term loss carryover.
Single event - Winner asserts the FMV on 6/1/2016 was only $350,000 instead of $400,000. Winner recognizes $350,000 of income on 6/1/2016, and nothing on 6/2/2016 since house was sold for the winner's basis. Result is winner taxed on $350,000 of income.
0
Posted on 6/5/16 at 10:54 am to WhiteMandingo
quote:
How do you figure the taxes on the house?
typically with a cash prize over a certain amount (depends on state, but typically over $5,000) at least 25% is withheld for taxes (lower value prizes need to still be claimed on taxes but are not withheld). For a prize like a car or house, they cannot withhold, so taxes must be paid up front prior to taking possession. This is why a lot of Price is Right prizes are not claimed. For something of this value, it would put them in the top marginal tax rate, which is 39.6% for federal. The rest depends on the state. I rounded to 50% because that is around the usual for federal plus state in the states I have lived.
Posted on 6/5/16 at 11:26 am to 911Moto
The facebook page is pretty funny.
This post was edited on 6/5/16 at 11:48 am
Posted on 6/5/16 at 12:32 pm to 911Moto
Inside job
Posted on 6/6/16 at 9:04 am to Chris Warner
i would be interested to hear more on this story
Posted on 6/6/16 at 12:41 pm to pngtiger
why couldn't they get a mortgage just for the taxes?
Posted on 6/6/16 at 12:45 pm to WhiteMandingo
quote:I assume the 400k is treated as income so income taxes are withheld/owed, not property taxes. Property taxes would be about 3500/year give or take.
How do you figure the taxes on the house?
Posted on 6/6/16 at 12:45 pm to ellishughtiger
quote:
I think the Feds need to audit St. Tammany
All joking aside, they do. I swear their contracts are about as mismanaged as I've dealt with. They are dirty, incompetent, or both.
Posted on 6/6/16 at 12:50 pm to The Mick
So they are taxing it as a cash asset rather than property?
Posted on 6/6/16 at 1:26 pm to MontyFranklyn
That should be treated as property for the winner, ergo allowing the winner to place a mortgage on that property. I don't see how they can call this a cash asset when clearly even in standard day to day home closings, the property has a value but not included in the AGI for that fiscal year. Something fishy is going on here me thinks.
Posted on 6/6/16 at 2:05 pm to MontyFranklyn
quote:I'm guessing so, similar to winning a lottery.
So they are taxing it as a cash asset rather than property?
Posted on 6/7/16 at 3:18 pm to 50_Tiger
quote:It has to be. The property only has a potential value until it is sold and the exchange of money is realized honestly. Even so, you can't tax the cash as income because it is a sale of a physical asset, not income earned.
That should be treated as property for the winner, ergo allowing the winner to place a mortgage on that property. I don't see how they can call this a cash asset when clearly even in standard day to day home closings, the property has a value but not included in the AGI for that fiscal year. Something fishy is going on here me thinks.
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