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Thread: I won a car

  1. #31
    justalayman is offline Senior Member
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    yep, looks like that ticket was worth $30k

    the car is still worth closer to $53k

    you have to realize, the only entity that can sell a brand new car is a dealer so unless the dealer was a party to those 2 guys swapping the ticket back and forth, your claims of arms length deals and willing participants is irrelevant.

    that means the only thing the other two guys could contract to sell was a ticket and that was apparently worth $30k.
  2. #32
    HappyWanderer is offline Member
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    The "pick-up" argument is more complex. Taking the vehicle is the code. I spoke of that with:
    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.
    What is your legal theory on that? Do you have a citation of any case law, regulation or other authoritative source? It's not that I disagree it is an issue we may need to deal with in tax court someday, it's just that the conclusion doesn't really affect the OP. If we were the buyer or the person giving the prize, we might formulate an argument (As I don't think there is a sure answer with the minimal search I've done.) to such an effect because of an IRS challenge someday, but, who cares? Do we "represent" (Because we don't represent, but we have to deal with a certain person.) the OP or do we imagine other problems and answer them too?
  3. #33
    HappyWanderer is offline Member
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    you have to realize, the only entity that can sell a brand new car is a dealer so unless the dealer was a party to those 2 guys swapping the ticket back and forth, your claims of arms length deals and willing participants is irrelevant.
    Please distinguish the citations I gave regarding fair market value and what the retailer determined the "price" was.
  4. #34
    HappyWanderer is offline Member
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    Just so we refocus, OP report the amount you got for the ticket. Put it in other income and do not apply fica/mcare taxes. Put a statement at the back of your return describing how and why things are different from the 1099 which people will want to give you. Don't care about the 1099 being different from what you report. Rest easy at night even though you may need to explain things to the IRS when the 1099 and your reporting differ.


    Anyone have a problem with that?
  5. #35
    justalayman is offline Senior Member
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    Quote Originally Posted by HappyWanderer View Post
    Please distinguish the citations I gave regarding fair market value and what the retailer determined the "price" was.
    you are claiming the $30k transaction sets the value of the car. It doesn't. It determines how much a ticket that allowed one to go pick up a car is worth. The cars value does not change. If that were the case, I would be running over there and buying a bunch of stickered at $53k cars for $30k. Neither party owned the car so nothing they do establishes value of the car.

    like I said, I will accept the the sticker may or may not establish FMV. That is a separate issue altogether but I would suggest if the tax payer wants to claim anything other than sticker (MSRP) they will have to support their claim of a lesser value based on other sales of that particular car from a dealer being less than sticker.

    using your argument, if I had the ticket and for whatever reason decided I wanted to sell it. I needed $5k to get out of the country and this was my easiest way although not the only way. Based on your argument, that would put the value of the car at $5k.

    the ticket and the car are two totally separate deals.

    the ticket was worth $30k to each of the two parties involved in that sale. Neither party bought or sold a car that day.

    first, define "the pick up" as the transaction where the title of the car was awarded to a party.

    considering that definition, who ever picked up the car is charged with the value of the car for tax purposes. The other party has nothing to do with it. All of his transactions have already been completed with the transfer of the ticket.

    the only thing that would change that and it changes a whole bunch of points is if the ticket is registered to a particular person and only that person can receive the prize.
  6. #36
    justalayman is offline Senior Member
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    does anybody realize that the dealer would have taken the needed information from whomever picked up the car so they could issue a 1099 to that party. They would also not have the information for the OP due to that?

    The person I sold the ticket to has writen a nasty letter to the foundation stating that they have obtained his tax # illeaglly

    so, how can the guy that picked up the car the somehow fraudulently gained his name and pertinent information and how would the dealer get OP's information so as to be able to issue a 1099 to him?

    .
    They foundation is now stating that I must take the 1099 as I won the ticket
    .

    so, how would they get the OP's name, address, or any information that would be adequate to issue a 1099 to that person?


    I think things are not quite like they have been presented.

    OP, was this ticket registered to you? If so, were there rules concerning the ownership of the ticket?

    Did they allow you to transfer ownership of the ticket?

    How did the dealership get your name, address, and any sort of identification numbers that would allow them to issue a 1099 to you?
  7. #37
    TinkerBelleLuvr is offline Senior Member
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    Where ever the friend went to pick up the car got his name and social security number at that time. Nothing fraudulent going on. Most likely, he signed paperwork of that nature.

    Now, I agree with Ldij. He doesn't understand that he can take the $30K off as basis.
  8. #38
    justalayman is offline Senior Member
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    =TinkerBelleLuvr;2480562]Where ever the friend went to pick up the car got his name and social security number at that time. Nothing fraudulent going on. Most likely, he signed paperwork of that nature.
    that I am fairly certain of. It was simply a claim made, via the OP, by the guy picking up the car.

    More of a question is how did anybody get the OP's information for a 1099? If they don't have it, OP needs to just tell them to go away. He did not get anything from them and there is no 1099 due to him.

    Now, I agree with Ldij. He doesn't understand that he can take the $30K off as basis.[
    who? the guy with the car? probably so.
  9. #39
    tecate is offline Member
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    I'm not so sure....

    I think OP looks like these two taxpayers:

    [url=http://scholar.google.com/scholar_case?case=15970260308561091957&q=lottery+ticket+capital+gain&hl=en&as_sdt=2002]lottery ticket capital gain - Google Scholar[/url]

    [url=http://scholar.google.com/scholar_case?case=14132715649148117709&hl=en&as_sdt=2002&kqfp=11462931159056221867&kql=268&kqpfp=634 3068024808860417#kq]- Google Scholar[/url]

    Only OP doesn't need to wait for his winnings. Since he/she could have gone to the dealer to claim his car, I think that is constructive receipt.

    It appears that his basis in the ticket was the FMV of the car, and that he\she probably sold it for a deductible loss.
  10. #40
    justalayman is offline Senior Member
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    Um, not seeing the connection. Both of those cases resulted in income derived from the prize owner selling the residual value of their prize to a 3rd party as plain old ordinary income and not capital gains.

    in the laterra case, the even stated they refused to address the value of the ticket as it was not part of this case.

    what did you see was applicable that I missed?
  11. #41
    tecate is offline Member
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    If you are talking about the footnote, I agree. The difference between the cases and OP is that (I think) OP recognized gross income of the FMV of the car before he\she sold the ticket. Other posters think that didn't happen to OP.
    Last edited by tecate; 02-03-2010 at 11:39 PM.
  12. #42
    LdiJ is offline Senior Member
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    Quote Originally Posted by HappyWanderer View Post
    Just so we refocus, OP report the amount you got for the ticket. Put it in other income and do not apply fica/mcare taxes. Put a statement at the back of your return describing how and why things are different from the 1099 which people will want to give you. Don't care about the 1099 being different from what you report. Rest easy at night even though you may need to explain things to the IRS when the 1099 and your reporting differ.


    Anyone have a problem with that?
    I really don't have a problem with that. Short term capital gain or other income produces the same tax result.

    I would really love to be able to treat the whole darned mess as capital transactions, because that would resolve the entire problem.

    Bought a ticket for a dollar, received a car for 53k. Capital gain of 52999.00

    Sold a car with a basis of 53k for 30k. Capital loss of 23k

    End result, short term capital gain of 29999.00.

    Of course that is unlikely (virtually no chance) to fly at all...but it would certainly be "clean".
    Last edited by LdiJ; 02-04-2010 at 07:54 AM.
  13. #43
    LdiJ is offline Senior Member
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    OP hasn't been back since yesterday morning. I hope we haven't been doing someone's homework.
  14. #44
    HappyWanderer is offline Member
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    like I said, I will accept the the sticker may or may not establish FMV. That is a separate issue altogether but I would suggest if the tax payer wants to claim anything other than sticker (MSRP) they will have to support their claim of a lesser value based on other sales of that particular car from a dealer being less than sticker.

    using your argument, if I had the ticket and for whatever reason decided I wanted to sell it. I needed $5k to get out of the country and this was my easiest way although not the only way. Based on your argument, that would put the value of the car at $5k.
    Two problems with that. One, it violates the guidelines for an arm's length sale. "The buyer and seller did not have to act,". And, two, subjective reasons DO affect the FMV!

    In the oldest case I posted, a couple won steamboat tickets (and some other things). The IRS claimed the FMV was the ticket price which the company sold many, many at exactly that price. The couple, and the court agreed, they would not have bought the tickets and only took them as a prize. Subjective reasons such as the likelihood the couple would have taken the trip (wealth and desire) and some other factors CAN change the "income" received by the couple.
  15. #45
    HappyWanderer is offline Member
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    If it is homework, I bet he gets the best grade in class. If he actually reads all the cases and discussion, he will know the "answer" as well as anyone. Since the answer is not the point of most homework of this type, but learning how to do original research, the grade should be fail.

    As a final point (although I alluded to it earlier), valuation is harder than you might think. It's not a matter of a number unless we have an arm's length sale which fairly establishes it. (Determining if the sale fairly establishes it is a matter of facts and circumstances.) Otherwise, we have a potential argument. This valuation problem comes up in a lot of areas. Say we have an estate and get a qualified appraisal valuing a property to get a step up. Then, we sell the property for a MUCH higher or lower price within a year. If a large estate and the amount is much higher, do we have a capital gain or a higher estate tax? (A substantive difference in tax owed.)

    How about putting a minority interest of an S-corp in an FLP or trust in order to reduce the estate. (For valid business purposes of course.) We don't just take the book value of the assets (including goodwill) we try to create an argument to have the "value" be as low as possible, thus allowing us to get as much out of the estate as possible without paying the gift tax. The value is argued to be less because of the lesser ability to alienate the minority interest. Who would want to buy something that is hard to sell? The fact it would be hard to sell makes it worth less. Also, being a minority interest, the lack of control puts the value less too. If the majority interest can determine to put profit back into the business rather than make a distribution, the minority could have a problem of having to pay taxes without having any money to do so. Again, reducing it's "value". (There are other things we could argue here too.)

    However, it's the same thing. Same stuff, same percentage ownership, same rights as was held before. Yet, for actual, real and subjective reasons, the fair market value is less. It's not a different problem just because we don't have an S-corp dealer who put a price tag on the interest.

    We don't really care what the store, or dealer, or artist, or carpenter or whatever, claims what something is worth or what it should sell for. If there are a lot of sales at a certain price, that would certainly be part of the argument, but, there are other factors involved. No sale is exactly the same as another. We could have a billion sales of SUVs at $1,000 each on one day, the next Iran gets the Bomb and gas prices go up to $10 a gallon the next. In a very real way, the SUVs are suddenly worth a LOT less.

    That's why the Supreme Court is right on how to determine the value of something. That, and the fact they don't want to argue every sale, is why the IRS agrees if you have a true arm's length sale. Are they going to start challenging all stock sales by saying it was actually worth less when you bought it or you should have gotten more when you sold it?

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