Hey everyone, I recently was fortunate enough to win a reality TV show and bring home a cash prize. The prize is 100,000 dollars and I anticipate recieving the check in the next month or two. My question is, Is there anything I can do with the money to minimize my losses to taxes. I am 22 years old and don't know a lot obout all the tax rules. Do I have the ability to give a certain amounts to my family members and make that portion of the $ untaxable? Are there any other 'tactics' one could use?
To anyone willing to share their knowledge, I appreciate it greatly - Jim.
Mon May 15, 2006 9:17 pm
coaster Senior Advisor
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I don't really know off the top of my head; if I get some time, I'll try to look into it. The one thing I do know is that you want to have whatever you're going to do in place BEFORE you take receipt of the check. Once you have the check in your hands it's known as "constructive receipt" and as far as the IRS is concerned, it's as if you had received all the money yourself as income.
You might want to consult a tax lawyer.
BTW - congratulations on your good fortune!!
~Tim~
Mon May 15, 2006 11:02 pm
Jimmyp New Poster
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thanks coaster for the reply. I am not exactly clear on what you said i must do. So- if I plan on giving a 'non-taxable gift' to family members (if it's even possible), i must declare that before i get my check? If you could further explain or anyone else could help me out, i'd appreciate it. Thanks again - Jim.
Tue May 16, 2006 6:40 am
coaster Senior Advisor
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I don't know. But that's why I think you should consult a tax lawyer pronto.
~Tim~
Tue May 16, 2006 12:40 pm
JBendar Senior Member
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Jimmyp:
Winning a prize is a good thing and a bad thing. The good thing is that it increases your wealth. The bad thing is the tax problem that results from your good fortune. Listed below is the IRS address that talks about gifts and estates. You will note that there is an exclusion for gifts. Tim had the best idea in reference to consulting a tax attorney. There are trusts that can be set up, etc. Since my background is not law, it would be best to check with a legal professional who could give you the best options that the law will allow. Congratulations, and good luck with your quest to save taxes!
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One way or another tax is going to be due on the whole prize amount. What I don't know is whether the grantor is able or willing to split up the proceeds (and tax liability) into multiple checks to multiple people. You also may have to file estimated quarterly tax form with payment if no or not enough tax is withheld from the payment. Otherwise, there might be an underwithholding penalty (likewise for your state, if they tax income).
The annual gift tax exclusion (or universal estate exclusion) doe not mean that you would not be taxed on the prize money, it just means that if you give someone money within the limits, and file any necessary forms, the receiver of the gift would not be taxed.
If you cannot figure it out from IRS website, you should hire a tax professional.
Fri May 26, 2006 7:57 am
coaster Senior Advisor
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mod's note
My apologies to the current member who composed a lengthy post in response to this thread, which was inappropriately resurrected by a preceding post of no consequence; however the thread is from 2006, and in keeping with forum policies and rules, both posts were removed.
