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I won a car

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distag16

Junior Member
Im here....just overwhelmed

Ok. I really appriciate your responces! I like the one that is so cut and dry. Why won't it fly? Maybe I should just get an attourney, someone who will also represent me with the IRS.

We know the organizer at the foundation. My son and the young lady who organized the event are dating. They know we were the winners of the car and my son had put his name on the ticket (even though we paid and asked him to buy it). That is water under the bridge. The foundation called and said they needed the phone number of the person who got the car? We provided that number to the foundation. When they called, he would not give his information to them and he told them the dealer had it. So they called the dealer (whom they have a relationship with). The dealer provided the number. When he received the 1099 in the mail he had a fit. And treatened to start litigation against them. The CFO of the foundation called my son (with the number provided by the girlfriend). The CFO said we had to take the 1099. She did agree to put it in our name instead of his. We have aggreed to accept the 1099 to ease the situation.

It sounds like we will have to claim both the 53,000.00 and the 30,000.00.
Can anyone summerize for me?
We were going to do our taxes this year on our own, but I think that is now out. We need a good tax man!!!

Thanks!
 
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"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."

I might have a tax professional preparer do the return so he can respond appropriately if the IRS asks about the mismatch and to make sure the sale was at arm's length. I'd drop a dime on the buyer in the statement and use his information in case the IRS claims it wasn't a genuine sale. (I might get the foundation to get some professional advice on who to issue the 1099 to. While you don't really care if you get it or not, the issue is less clear as to who should get it. The buyer is blowing smoke on suing the foundation for a number of reasons. [Well, successfully suing the foundation.])
 

justalayman

Senior Member
. maybe I am just really confused but I see something possibly quite different here.


based on the OP getting the 1099, the other guy will have no income tax liability at all. He simply bought a car from the OP for $30k and will simply pay sales tax on that. If the 1099 is issued to the OP, the entire gains situation is only on the OP. The guy with the car has gained nothing.

the OP's situation then becomes the same as every other person that won a car and sold it to pay the taxes on it. They are not taxed on the amount they sold it for, they are taxed on the value of the car, which I still maintain is ~$53k. They are merely converting the car to cash so there is no gain of the $30k. They did not lose anything because that car cost them only $1 (or the cost of the ticket, what ever it was). They chose to sell a car that was worth much more for a reduced price. Unless the IRS changed things, that only counts with charitable donations. So, they pay taxes on FMV, not the $30k.

am I missing something with that explanation?

Oh, and just a note

both the cases tacate linked ruled that income derived from this type of transaction is ordinary income, not capital gains.
 
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justalayman

Senior Member
fine, I concede with one reservation:

I might have a tax professional preparer do the return so he can respond appropriately if the IRS asks about the mismatch and to make sure the sale was at arm's length. I'd drop a dime on the buyer in the statement and use his information in case the IRS claims it wasn't a genuine sale
there has been no information regarding the relationship between the buyer and the OP to even attempt to determine if the sale would be considered to be at arm's length.

and "dropping a dime" on the buyer? What's that about? He simply bought a car. If the IRS determines it wan't a genuine sale, OP pays the additional taxes and penalties. Buyer still is not changed unless the IRS wants to make the argument he was complicit in tax fraud. Kind of hard to prove. All he would need is your arguments here to defend himself.
 
I agree we don't have any information on if it was an arm's length sale beyond the fact there has been no claim of gifting something to the buyer. In my first post on the matter I said "if".
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.
The "dime" dropping comment has to do with questions regarding the 1099 and picked up idea. I'm not entirely certain the OP should get the 1099. The other party is the one who picked up the car. There are more issues here than the FMV of the car. Those other issues are why it's better to disclose.
 
Because the code says:
(a) General rule
Except as otherwise provided in this section or in section 117
(relating to qualified scholarships), gross income includes amounts
received as prizes and awards.
Who has "received" this prize?

As was mentioned in my first post in the thread,
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.
 
My goodness, after posting my reply I went to the link Tecate provided. Who knew, indeed. However, it doesn't completely answer the question for two reasons. One, we don't know the lottery rules. (Does there need to be pictures or a ceremony for publicity? etc.) And, two (from the article):

The Tax Court had previously addressed this issue in Hornung v. Commissioner.[8] Paul Hornung, a football player for the Green Bay Packers, won a Corvette as a prize on December 31, 1961, for his performance in the 1961 NFL Championship Game.[9] The game was played in Green Bay, Wisconsin, the car was kept at a dealership in New York City, and Hornung did not retrieve the car until January 3, 1962.[10] The court decided that Hornung had not constructively received the car (income) in 1961 because, under the circumstances, it would have been unreasonable to expect him to retrieve the car on the day he won it.[11]
I still tend to agree it was constructively received by the OP, but, I'm not sure. Since it really doesn't matter to the OP, I didn't look into the issue further.
 

LdiJ

Senior Member
My goodness, after posting my reply I went to the link Tecate provided. Who knew, indeed. However, it doesn't completely answer the question for two reasons. One, we don't know the lottery rules. (Does there need to be pictures or a ceremony for publicity? etc.) And, two (from the article):

I still tend to agree it was constructively received by the OP, but, I'm not sure. Since it really doesn't matter to the OP, I didn't look into the issue further.
If its constructively received as soon as its won, how does that jive with someone's right to decide to NOT claim a prize?
 

tecate

Member
Interesting topic for one of the biggest gambling days of the year!

Aren't winning and not claiming two separate events?

Why should the gambler's subsequent decision about what to do with his winnings affect the income he received when he won his bet?
 
Why should the gambler's subsequent decision about what to do with his winnings affect the income he received when he won his bet?
Why? WHY!!!??? This is tax law. The "why" is usually predicated on some legislator's whims or payment's received for "access". Why is for the higher pay grades than I. For me, I like "what" questions.

And the answer is the code says a person can not claim the prize not have it be income.
 

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