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I won a car

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distag16

Junior Member
What is the name of your state (only U.S. law)? CA
I won a car valued at 53,000.00. I sold the ticket to a person for 30,000.00. This person went to the dealer and picked up the car. The charitable foundation needs to send a 1099 to the person who got the car. He is saying that it is a fraudulent 1099 and he wont accept it. Are we liable for the 1099 taxes? or is he? We never took posession of the car.
 


LdiJ

Senior Member
What is the name of your state (only U.S. law)? CA
I won a car valued at 53,000.00. I sold the ticket to a person for 30,000.00. This person went to the dealer and picked up the car. The charitable foundation needs to send a 1099 to the person who got the car. He is saying that it is a fraudulent 1099 and he wont accept it. Are we liable for the 1099 taxes? or is he? We never took posession of the car.
The charitable foundation cannot issue a 1099 to you, because you did not pick up the car. The charitable foundation has to issue a 1099 to the person who took possession of the car. However, that person also has a "basis" in the car, the 30k you sold the ticket to him for, so his taxable gain is 23,000 intead of 53,000.
 

FlyingRon

Senior Member
Whoever receives the car from the charity gets the car as ordinary income and reported on the 1099. The charity has no way of telling how he got the ticket (not that they need care).

He doesn't have to accept the 1099, but it doesn't make any difference as to his tax liability. The charity will submit it with his name /ssn on it. Of course, he's under no obligation to accept the car (any more than you did).

Of course, the $30,000 you took is taxable to you whether he files a 1099 or not.
 

LdiJ

Senior Member
Whoever receives the car from the charity gets the car as ordinary income and reported on the 1099. The charity has no way of telling how he got the ticket (not that they need care).

He doesn't have to accept the 1099, but it doesn't make any difference as to his tax liability. The charity will submit it with his name /ssn on it. Of course, he's under no obligation to accept the car (any more than you did).

Of course, the $30,000 you took is taxable to you whether he files a 1099 or not.
Re the bolded, absolutely. You have a 30k capital gain if you paid nothing for your ticket to win the car, and if you did pay something for your ticket, its 30k minus the cost of the ticket.
 

FlyingRon

Senior Member
Be careful using the word "gain" with respect to sweepstakes winnings. It's not a capital gain, it's ordinary income. Further there would appear to ought to be some withholding here not just a 1099 and take the car.
 

distag16

Junior Member
Charitable foundation 1099 HELP

The person I sold the ticket to has writen a nasty letter to the foundation stating that they have obtained his tax # illeaglly. They foundation is now stating that I must take the 1099 as I won the ticket. So, my question is: How can I off set the 53,000.00 value listed on the 1099? I understand about claiming the 30,000.00 as income. I am going to do that. But where do I go from here? Now it looks like I took in 83,000.00 and I never recieved the car?
 

Andy0192

Member
Tell the foundation that if they wish to supply you with a car, that you'll be happy to accept the 1099.

Just because the other person is pitching a hissy fit doesn't mean they're not liable to pay the tax.
 
The value of the car is not what is on the 1099. If you immediately sold it at an arm's length transaction and only got $30K, I'd say that was the FMV of the car when you "received" it.

I understand the problem LdiJ and FlyingRon are talking about because the code talks about the person who receives the car and not the one who wins it. But, I suspect the OP had to transfer the car to the other party even if the other party might have been the one to go to the lot and pick it up.

Depending on how much time/money the OP wanted to spend, I might put down the $30K as non-fica/mcare other income and put a statement that the vehicle was sold for that amount in an arm's length transaction before it was even picked up. (I'd include the purchaser's info as well.) Let the people issue you the 1099 in whatever amount they want as the retail value, you have the duty to pay taxes on the FMV.

I'm uncertain if the other guy has any income in this deal, he just bought a car.
 

Andy0192

Member
I won a car valued at 53,000.00. I sold the ticket to a person for 30,000.00. This person went to the dealer and picked up the car. The charitable foundation needs to send a 1099 to the person who got the car.... We never took posession of the car.
The OP certainly presents it as a situation where he sold the ticket, not the car.
 
I don't completely disagree with you Zigner as that is a completely valid point. However, he didn't quite buy "a" ticket, he bought the ticket which was already declared the winning ticket. He bought the rights to a car. What was the FMV of those rights?
 

Zigner

Senior Member, Non-Attorney
I don't completely disagree with you Zigner as that is a completely valid point. However, he didn't quite buy "a" ticket, he bought the ticket which was already declared the winning ticket. He bought the rights to a car. What was the FMV of those rights?
Per the contest rules (I'm reaching just a tad here), I bet the value was declared as $53,000.
 

FlyingRon

Senior Member
The value of the car is not what is on the 1099. If you immediately sold it at an arm's length transaction and only got $30K, I'd say that was the FMV of the car when you "received" it.
You can say that, but that is NOT what the IRS says. The IRS says that the value of a new car won as a prize is the sticker price (not what you could get it for, not what the charity paid or what whoever donated it took as a deduction).

The issue here is that the OP sold the guy a ticket that entitles him to claim a car with $50,000 x His Margin TaxRate worth of tax liability.

The OP's income is $30,000 received minus the price of the ticket.

Note the 1099 just indicates what was paid out. It doesn't include the basis. Believe me, I have found that out when I switched brokers and the idiot Amerprise issued a 1099 for the secuirties transfered to the other broker (improper and illegal as hell as there was actually no sale). Next sound I hear is the IRS wanting to know why I didn't declare all this income.
 
I believe the code and the regulations reference "fair market value", not 1099 amount. Is there a case or letter ruling out there listing sticker price?
 

FlyingRon

Senior Member
Absent convincing argument to the contrary, the MSRP is the FMV as far as the IRS is concerned. I know of nobody who has prevailed trying to convince the IRS that FMV of a car is NOT the sticker/MSRP and that people generally don't pay that price .
 

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