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  1. #1
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    gdn's Avatar
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    If you win a car, what taxes must you pay?

    Just curious - if someone wins a car in a contest of any sort, what are the tax implications? Do you pay sales tax? Income tax?

    What if someone can't afford to pay all that tax? Can they sell the car immediately?

  2. #2
    FormerlyKnownAsMHHL FormerlyKnownAsMHHL's Avatar
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    Re: If you win a car, what taxes must you pay?

    Quote Originally Posted by gdn
    Just curious - if someone wins a car in a contest of any sort, what are the tax implications? Do you pay sales tax? Income tax?

    What if someone can't afford to pay all that tax? Can they sell the car immediately?

    I would imagine that you would pay sales tax on the MSRP and then income tax as a 20,000 boost in your income. Not positive though.

  3. #3
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    Re: If you win a car, what taxes must you pay?

    I had a friend that won a car and he had to take out a loan to pay his taxes !
    No Rally Monkeys, Towels or hankies
    Just 50,000 fans of the New York Yankees.

  4. #4
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    Re: If you win a car, what taxes must you pay?

    Quote Originally Posted by gdn
    Just curious - if someone wins a car in a contest of any sort, what are the tax implications? Do you pay sales tax? Income tax?

    What if someone can't afford to pay all that tax? Can they sell the car immediately?
    I think you just have to pay income tax on it. If you can't afford it when your taxes are due you could sell the car.

  5. #5
    FormerlyKnownAsMHHL FormerlyKnownAsMHHL's Avatar
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    Re: If you win a car, what taxes must you pay?

    Quote Originally Posted by wexy
    I had a friend that won a car and he had to take out a loan to pay his taxes !

    Wex, he/she is not your friend anymore?

  6. #6
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    Re: If you win a car, what taxes must you pay?

    You pay sales tax when you register the car then the IRS requires that non-money winnings be taxed at fair market value.

  7. #7
    Movin' on Bub's Avatar
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    Re: If you win a car, what taxes must you pay?

    Quote Originally Posted by yankeebot
    You pay sales tax when you register the car then the IRS requires that non-money winnings be taxed at fair market value.
    You get a 1099 and pay ordinary income taxes based on the fair market value. I don't know about the sales tax though...if a game show buys a car and gives it away, I would assume that they would pay the sales tax, so why would the winner have to pay them again?
    Let the kids play.

  8. #8

    Re: If you win a car, what taxes must you pay?

    Remember when Oprah gave everyone in her show's audience a new car and they all went crazy? Then they found out they had to pay taxes on the car and they weren't so happy about it. Didn't a few of them even try to sue Oprah because they believed she should be liable to pay the taxes on the car she gifted to them? You gotta love people...

  9. #9
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    Re: If you win a car, what taxes must you pay?

    Quote Originally Posted by Bub
    You get a 1099 and pay ordinary income taxes based on the fair market value. I don't know about the sales tax though...if a game show buys a car and gives it away, I would assume that they would pay the sales tax, so why would the winner have to pay them again?
    I don't know but when the winner goes to register the car they are going to have to pay their state sales tax I would think.

    I wonder if the show buys the car or if it's given to them as advertisement.
    You know you're an addict when you put Crackbook on your Crackberry. -Toaderly

  10. #10
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    Re: If you win a car, what taxes must you pay?

    Quote Originally Posted by Bub
    You get a 1099 and pay ordinary income taxes based on the fair market value. I don't know about the sales tax though...if a game show buys a car and gives it away, I would assume that they would pay the sales tax, so why would the winner have to pay them again?
    game shows don't pay cars, they are given to them as advertisements

  11. #11
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    Re: If you win a car, what taxes must you pay?

    Quote Originally Posted by FormerlyKnownAsMHHL
    Wex, he/she is not your friend anymore?
    He sold it right and wound up breaking even but it wasn't worth the aggravation.
    No Rally Monkeys, Towels or hankies
    Just 50,000 fans of the New York Yankees.

  12. #12
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    Re: If you win a car, what taxes must you pay?

    Years ago, I won a boat on The Price Is Right. I did have to pay sales tax. I think I added the value to my income that yeasr as well.


    Here's the answer...
    http://moneycentral.msn.com/content/Taxes/P43441.asp

    The BasicsAnd the winner is you . . . and the IRS
    advertisement
    //');//]]>
    So when you win a trip, a car or cash, thank your lucky stars and pay the tax man. Whether your good fortune is won or bartered, the IRS probably considers it taxable income.

    By Jeff Schnepper

    A friend recently sent me a news article about someone of modest means who had won a trip to Africa valued at more than $20,000.

    I was of two minds about the winner’s luck. If the winner makes $30,000 a year, a trip to Africa is a once-in-a-lifetime experience, and he should enjoy it. But what about the tax bill he’ll get stuck with?

    Taxes? Yes, the taxes. The safari winner may, in fact, owe the federal government much as $5,000

    Yes, sometimes, even when you win, you can still lose. Everyone knows that income is taxable, but there’s lots of stuff you really didn’t know that counts as “income” and could add to your tax bill. Here’s a rundown.

    If you win, you pay

    If you enter a contest and win, your winnings are taxable income. It doesn’t make any difference how you win the prize. You can win a drawing at the county fair. Your final answer may actually win you the million bucks on “Who Wants to Be a Millionaire.” Ditto for a beauty pageant. You may get $1 million because your cure for cancer won the Nobel Prize for medicine. You invent the next new hot bit of software and get a huge bonus.

    How you get the prize -- whether it's cash or a new Mercedes -- makes no difference to the Internal Revenue Service; it’s all taxable.

    Cash prizes have one big advantage over non-cash prizes. They give you the liquidity to pay your fiscal fine.

    Bartering
    If you get audited, one of the first questions you’ll be asked is whether you did any bartering. Bartering is the exchange of goods or services directly for other goods and services.

    If I do my neighbor’s taxes in exchange for his mowing my lawn all summer, we both have income. He should be taxed on the value of my preparing his taxes, and I should be taxed on the value of his mowing my lawn.

    It’s done all the time -- you can use my sailboat if I can use your cottage in the mountains for the weekend. Again, we both have taxable income equal to the value of what we receive.

    Most people don’t report this informal income because they don’t even realize it’s income, and it would just about impossible for the IRS to trace all of those informal exchanges. But the IRS can and does track bartering clubs, which are now required to issue 1099 forms for exchange transactions.

    Can you beat the IRS?

    There aren’t many ways to keep your good fortune from the taxman. Probably the best way is to have the prize or award directly given to the charity of your choice. But you don’t get the charitable-donation deduction. You simply exclude it from income. It’s as if you never got the award.

    There is another, more-subtle way to limit your tax exposure. You include prizes and award winnings as income on your return at their fair market value to you. This is very important. It’s not the general fair market value, but rather the fair market value to you.

    Let’s say you already have two new attaché cases and, on a quiz show, win a third that normally retails at $200. The value of that third attaché case toyou may be negligible. It clearly wouldn’t be its full retail-selling price.

    So you could try to run a new, lower price by the IRS. The burden, however, is on you to prove the reduced value.

    If you sell the item, the amount received is normally deemed to be its fair market value. If, for example, you’re awarded a car that retails for $20,000 and you immediately sell that car to someone else in town for $15,000, the amount you would include in your income should only be the lower amount, or $15,000.

    Be careful here, though. If you sell the car to a relative, the IRS will argue that you received $20,000 in income and made a nondeductible gift of $5,000 to your relative. Sorry.

  13. #13
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    Re: If you win a car, what taxes must you pay?

    Quote Originally Posted by NJ Fan
    Years ago, I won a boat on The Price Is Right. I did have to pay sales tax. I think I added the value to my income that yeasr as well.
    Yeah, yeah....taxes, whatever. Now tell me more about winning on The Price Is Right!

  14. #14
    Movin' on Bub's Avatar
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    Re: If you win a car, what taxes must you pay?

    Quote Originally Posted by NJ Fan
    Years ago, I won a boat on The Price Is Right. I did have to pay sales tax.
    This strikes me funny. If a boat today costs 20,000 and you win one and have to pay $1,600 in sales taxes, are you going to be about it?

    Let the kids play.

  15. #15
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    Nome's Avatar
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    Re: If you win a car, what taxes must you pay?

    I think you don't have to pay State Sales tax because you didn't BUY the car. The Contest Operator will pay Sales Tax when he buys the car to be used as a prize. It is certain that you will have to pay Federal Income tax on the winning gain and it is probable that you will also have to pay State Income Tax on the winnings.

    Sorry.

    Andy
    Yogi is a National Treasure. Let's put him in a National Hall of Fame. The man has no peers.

  16. #16
    Where my Pitches at? Arod for President's Avatar
    Join Date
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    Newburgh, NY

    Re: If you win a car, what taxes must you pay?

    Quote Originally Posted by NJ Fan
    Years ago, I won a boat on The Price Is Right. I did have to pay sales tax. I think I added the value to my income that yeasr as well.


    Here's the answer...
    http://moneycentral.msn.com/content/Taxes/P43441.asp

    The BasicsAnd the winner is you . . . and the IRS
    advertisement
    //');//]]>
    So when you win a trip, a car or cash, thank your lucky stars and pay the tax man. Whether your good fortune is won or bartered, the IRS probably considers it taxable income.

    By Jeff Schnepper

    A friend recently sent me a news article about someone of modest means who had won a trip to Africa valued at more than $20,000.

    I was of two minds about the winner’s luck. If the winner makes $30,000 a year, a trip to Africa is a once-in-a-lifetime experience, and he should enjoy it. But what about the tax bill he’ll get stuck with?

    Taxes? Yes, the taxes. The safari winner may, in fact, owe the federal government much as $5,000

    Yes, sometimes, even when you win, you can still lose. Everyone knows that income is taxable, but there’s lots of stuff you really didn’t know that counts as “income” and could add to your tax bill. Here’s a rundown.

    If you win, you pay

    If you enter a contest and win, your winnings are taxable income. It doesn’t make any difference how you win the prize. You can win a drawing at the county fair. Your final answer may actually win you the million bucks on “Who Wants to Be a Millionaire.” Ditto for a beauty pageant. You may get $1 million because your cure for cancer won the Nobel Prize for medicine. You invent the next new hot bit of software and get a huge bonus.

    How you get the prize -- whether it's cash or a new Mercedes -- makes no difference to the Internal Revenue Service; it’s all taxable.

    Cash prizes have one big advantage over non-cash prizes. They give you the liquidity to pay your fiscal fine.

    Bartering
    If you get audited, one of the first questions you’ll be asked is whether you did any bartering. Bartering is the exchange of goods or services directly for other goods and services.

    If I do my neighbor’s taxes in exchange for his mowing my lawn all summer, we both have income. He should be taxed on the value of my preparing his taxes, and I should be taxed on the value of his mowing my lawn.

    It’s done all the time -- you can use my sailboat if I can use your cottage in the mountains for the weekend. Again, we both have taxable income equal to the value of what we receive.

    Most people don’t report this informal income because they don’t even realize it’s income, and it would just about impossible for the IRS to trace all of those informal exchanges. But the IRS can and does track bartering clubs, which are now required to issue 1099 forms for exchange transactions.

    Can you beat the IRS?

    There aren’t many ways to keep your good fortune from the taxman. Probably the best way is to have the prize or award directly given to the charity of your choice. But you don’t get the charitable-donation deduction. You simply exclude it from income. It’s as if you never got the award.

    There is another, more-subtle way to limit your tax exposure. You include prizes and award winnings as income on your return at their fair market value to you. This is very important. It’s not the general fair market value, but rather the fair market value to you.

    Let’s say you already have two new attaché cases and, on a quiz show, win a third that normally retails at $200. The value of that third attaché case toyou may be negligible. It clearly wouldn’t be its full retail-selling price.

    So you could try to run a new, lower price by the IRS. The burden, however, is on you to prove the reduced value.

    If you sell the item, the amount received is normally deemed to be its fair market value. If, for example, you’re awarded a car that retails for $20,000 and you immediately sell that car to someone else in town for $15,000, the amount you would include in your income should only be the lower amount, or $15,000.

    Be careful here, though. If you sell the car to a relative, the IRS will argue that you received $20,000 in income and made a nondeductible gift of $5,000 to your relative. Sorry.

    Yo I cannot believe that! Thats some BS! Its unbelievable that these gameshows can get away with stuff like that. Or is it just the fact that people just dont know enough!

  17. #17
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    Re: If you win a car, what taxes must you pay?

    Quote Originally Posted by yankeebot
    Yeah, yeah....taxes, whatever. Now tell me more about winning on The Price Is Right!
    Well----it was Y E A R S ago! I believe it was 1977.......Holy cow...almost 30 years ago???!!!! Johnny Olson said, "Julie ________, Come On Down...you're the next contestant on The Price Is Right!!" I was one of the first four to be called. And then we bid....., and I won a sailboat! Back then, it was $999.00. I lost the game I played on the stage though. It was "Danger Price" where I couldn't pick a prize with a certain price. Well...after 2 guesses I picked the wrong one. The 4 prizes were: season tix to the LA Rams, Dodgers, Kings & Lakers. At 18 yeasr old, I had NO IDEA what those cost...and in LA? Well, I lost. Then came the big wheel. I got 95 cents! But the nasty woman from Cherry Hill, NJ got $1.00! Oh well! It was a great time.

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