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GIFT TAX QUESTIONS????? PLEASE HELP ME..

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bugsbuni

Guest
Hi! I live in the state of Texas and I recently won a jet ski w/trailer that was being given away by a local grocery store and soft drink company. This was the type of give away that you fill out a small form with your name and contact info and they draw the winner from the entries. After I was notified that I had won the drawing, I went to claim my "prize" and was told that I would need to pay $800 for tax, title, and license. I was then contacted by the soft drink company who told me that I would need to also pay an additional $2000 gift tax payment, for a total of $2800. I have been trying to find out whatever I can about gift taxing on the web tonight and so far, everything I have read appears as though the person(s) GIVING the gift are responsible for the gift tax, and that is only applicable when the gift or total of gifts given in a calendar year total over $10,000. Perhaps I am reading this wrong or just not finding the correct reading material. My questions are: this was supposed to be a "free drawing", now I realize that you most likely would be responsible for the tax, title, license, but all of a sudden this "free drawing" has turned into quite an expensive "gift". Am I liable for the gift tax? Please let me know something as soon as possible as I need to determine the disposition I will need to take as to whether or not I will "accept" this "gift" after paying $2800 for it. Seems like false advertising if nothing else! ? ! ?
 


dmode101

Member
You have to pay income taxes on the prize, but certainly not gift taxes. It is simply not a gift. Either they used the wrong terms or they are scamming you. The income tax is just basically add the fair market value of the prize as ordinary income for the year.

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Jeffrey R. Gottlieb, Attorney at Law
http://www.illinoisestateplan.com
This response is not legal advice and does not create an attorney-client relationship.
 
P

peter

Guest
OK here is what I think... The value was $10,000 correct?

First you DO have to pay sales tax on the value of the item UP FRONT! so $800 is reasonable

Second you do have to get title and license anyway

Third and you should read the contract very very closely the extra $2000 .....the US government asks for a 20% witholding on any gift items, to prevent you rom NOT DECLARING IT ON YOUR INCOME TAXES!

So you declare it as INCOME, and then at the bottom where it ays how much TAXES WAS WITH HELD you ADD the $2000 back, and you will get a BIG BIG REFUND NEXT YEAR!

Its the same if you take money out of a IRA or 401K , they ask you if you want to withold 20% so you dont get a whopping TAX BILL next year.

 

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