Welcome to the MacNN Forums.

If this is your first visit, be sure to check out the FAQ by clicking the link above. You may have to register before you can post: click the register link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below.

You are here: MacNN Forums > Community > MacNN Lounge > Income taxes on "winnings"...what's the true story?

Income taxes on "winnings"...what's the true story?
Thread Tools
ManOfSteal
Addicted to MacNN
Join Date: Aug 2004
Location: Outfield - #24
Status: Offline
Reply With Quote
Oct 2, 2004, 12:22 AM
 
After recently hearing that those who won a "free" car from Oprah have to pay the income tax on the MSRP of the car (many can't afford it and have bitched)...I began to wonder what happens on other shows.

For example...what happens to the families on Extreme Makeover: Home Editions? I have ALWAYS worried about them. Like the single mother who works as a social worker, makes barely enough $$ to stay afloat... and adopted a teenager. Or another show where the man had 8 childeren. I can only assume that he doesn't make a ton of money. Now these people have not only received new furniture, appliances, back yards, pools, saunas, some guy got a truck, but practically new homes from the group up. How do they possibly pay for income on all of that, plus, you know darn well, their county is out there the next day assessing the home and upping their property taxes. How can any of these people afford these makeovers once they are completed? You can only classify so much as a gift ($20k?) from what I recall...

Not to mention all the added electricity/gas/water bills to run these new makeover homes? I'm VERY curious as how this is done after the show/fact! Anyone have any ideas? I know they can mortgage the place some more, but some of them wouldn't be able to afford a higher monthly payment!

Baffled.
     
macroy
Mac Elite
Join Date: Nov 2002
Location: Ellicott City, MD
Status: Offline
Reply With Quote
Oct 2, 2004, 12:49 AM
 
Originally posted by manofsteal:
After recently hearing that those who won a "free" car from Oprah have to pay the income tax on the MSRP of the car (many can't afford it and have bitched)...I began to wonder what happens on other shows.

For example...what happens to the families on Extreme Makeover: Home Editions? I have ALWAYS worried about them. Like the single mother who works as a social worker, makes barely enough $$ to stay afloat... and adopted a teenager. Or another show where the man had 8 childeren. I can only assume that he doesn't make a ton of money. Now these people have not only received new furniture, appliances, back yards, pools, saunas, some guy got a truck, but practically new homes from the group up. How do they possibly pay for income on all of that, plus, you know darn well, their county is out there the next day assessing the home and upping their property taxes. How can any of these people afford these makeovers once they are completed? You can only classify so much as a gift ($20k?) from what I recall...

Not to mention all the added electricity/gas/water bills to run these new makeover homes? I'm VERY curious as how this is done after the show/fact! Anyone have any ideas? I know they can mortgage the place some more, but some of them wouldn't be able to afford a higher monthly payment!

Baffled.
Wow... the tax is based on the MSRP? That sucks.... especially when you rarely pay MSRP for a car. You would think it'd be the invoice of the car.

But this is a good point. I would assume the extreme makeover stuff would be related to home improvement?? so their property value may rise... leading to a higher assessment for their house. Just a guess....
     
AKcrab
Moderator Emeritus
Join Date: Apr 2001
Location: Wasilla, Alaska
Status: Offline
Reply With Quote
Oct 2, 2004, 12:51 AM
 
Dang, I thought maybe gorickey won something.
     
ManOfSteal  (op)
Addicted to MacNN
Join Date: Aug 2004
Location: Outfield - #24
Status: Offline
Reply With Quote
Oct 2, 2004, 12:53 AM
 
Originally posted by AKcrab:
Dang, I thought maybe gorickey won something.
I did on eBay if that counts...

     
Gankdawg
Professional Poster
Join Date: Oct 2001
Location: Pacific Northwest
Status: Offline
Reply With Quote
Oct 2, 2004, 06:08 AM
 
Originally posted by manofsteal:
After recently hearing that those who won a "free" car from Oprah have to pay the income tax on the MSRP of the car (many can't afford it and have bitched)...I began to wonder what happens on other shows.

For example...what happens to the families on Extreme Makeover: Home Editions? I have ALWAYS worried about them. Like the single mother who works as a social worker, makes barely enough $$ to stay afloat... and adopted a teenager. Or another show where the man had 8 childeren. I can only assume that he doesn't make a ton of money. Now these people have not only received new furniture, appliances, back yards, pools, saunas, some guy got a truck, but practically new homes from the group up. How do they possibly pay for income on all of that, plus, you know darn well, their county is out there the next day assessing the home and upping their property taxes. How can any of these people afford these makeovers once they are completed? You can only classify so much as a gift ($20k?) from what I recall...

Not to mention all the added electricity/gas/water bills to run these new makeover homes? I'm VERY curious as how this is done after the show/fact! Anyone have any ideas? I know they can mortgage the place some more, but some of them wouldn't be able to afford a higher monthly payment!

Baffled.
I have wondered the same thing. And on Pimp My Ride, they put $20K into a car that's worth $200. How does the person even get insurance on the car?
     
kikkoman
Senior User
Join Date: Nov 2002
Status: Offline
Reply With Quote
Oct 2, 2004, 08:49 AM
 
I know at least in my state you can just transfer the title of an automobile and avoid paying any sales tax. As for the new homes I would expect they have increased property taxes and insurance. There is also federal "gift" tax on anything over $11,000.
     
storer
Mac Elite
Join Date: Jun 2004
Location: Australia
Status: Offline
Reply With Quote
Oct 2, 2004, 09:13 AM
 
I hope its not like that, because why give anyone anything? its would just be a waste.
     
SimeyTheLimey
Posting Junkie
Join Date: Mar 2002
Location: Alexandria, VA
Status: Offline
Reply With Quote
Oct 2, 2004, 09:27 AM
 
Income tax 101. The tax code defines gross income as income from whatever source derived. That includes income in the form of goods or services which you would otherwise have to pay for. There are certain narrowing exceptions to that, but the basic concept is very broad.

So yes, if you are given a car, your wealth just went up by the value of a car. You owe income tax.

Of course, the tax you owe is only a percentage of the value of the car. The car will still be worth more than the tax. The percentage you pay to the IRS will depend on what your marginal tax rate ends up being for the year. But if the gift is big enough, it could throw you into a higher tax bracket, and then that higher marginal rate will apply to your entire income.
     
storer
Mac Elite
Join Date: Jun 2004
Location: Australia
Status: Offline
Reply With Quote
Oct 2, 2004, 09:29 AM
 
wonder whether or not it applies here. i don't think so, because i have friends that won/were given a car, and they spoke nothing of it.
     
SimeyTheLimey
Posting Junkie
Join Date: Mar 2002
Location: Alexandria, VA
Status: Offline
Reply With Quote
Oct 2, 2004, 09:37 AM
 
Here is another nice little wrinkle. Suppose the person giving you a gift tries to offset the tax consequences by paying your income taxes that you owe on the gift. Paying the income taxes for the other person is also taxable income to that person. They will still owe taxes on the money they were given to pay their taxes.
     
Joshua
Mac Elite
Join Date: Oct 1999
Location: Chicago, IL USA
Status: Offline
Reply With Quote
Oct 2, 2004, 10:31 AM
 
I actually looked into this a few weeks ago out of curiosity. I'll try to dig up the links I found, but this is basically what they do:

The home owner leases their home to the production company for 10 days and charges $50,000 in rent. The production company then "pays" the rent with the improvements they make to the home. The homeowners can then rely on a provision in the tax code which allows a homeowner to avoid paying taxes on rental income if they rent their home out for fewer than 15 days.

Edit: here a link to the TaxProf Blog on this issue.

This relies on Code section 280(A)(g), which reads:

...if a dwelling unit is used during the taxable year by the taxpayer as a residence and such dwelling unit is actually rented for less than 15 days during the taxable year, then (1) no deduction otherwise allowable under this chapter because of the rental use of such dwelling unit shall be allowed, and (2) the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer under section 61.

The question is whether the homeowner can legitimately claim that the hundreds of thousands of dollars worth of improvements, appliances, goods, etc. are really rental income.
( Last edited by Joshua; Oct 2, 2004 at 10:43 AM. )
Safe in the womb of an everlasting night
You find the darkness can give the brightest light.
     
SimeyTheLimey
Posting Junkie
Join Date: Mar 2002
Location: Alexandria, VA
Status: Offline
Reply With Quote
Oct 2, 2004, 10:45 AM
 
Originally posted by Joshua:
I actually looked into this a few weeks ago out of curiosity. I'll try to dig up the links I found, but this is basically what they do:

The home owner leases their home to the production company for 10 days and charges $50,000 in rent. The production company then "pays" the rent with the improvements they make to the home. The homeowners can then rely on a provision in the tax code which allows a homeowner to avoid paying taxes on rental income if they rent their home out for fewer than 15 days.
That's interesting. Could you post the links? I'm curious about this exception. Rental income is usually just that -- income. I'd like to see the exception that lets a person take $50,000 in income and lets you not pay tax on it. That seems like quite a loophole.

Edit: forget it. I just googled the IRS publication. It sounds to me like they are stretching that loophole to breaking point. The IRS is slow, but I suspect they (or congress) will close that one.

The pub is here.
( Last edited by SimeyTheLimey; Oct 2, 2004 at 10:53 AM. )
     
SimeyTheLimey
Posting Junkie
Join Date: Mar 2002
Location: Alexandria, VA
Status: Offline
Reply With Quote
Oct 2, 2004, 10:58 AM
 
Originally posted by Joshua:
I actually looked into this a few weeks ago out of curiosity. I'll try to dig up the links I found, but this is basically what they do:

The home owner leases their home to the production company for 10 days and charges $50,000 in rent. The production company then "pays" the rent with the improvements they make to the home. The homeowners can then rely on a provision in the tax code which allows a homeowner to avoid paying taxes on rental income if they rent their home out for fewer than 15 days.

Edit: here a link to the TaxProf Blog on this issue.

This relies on Code section 280(A)(g), which reads:

...if a dwelling unit is used during the taxable year by the taxpayer as a residence and such dwelling unit is actually rented for less than 15 days during the taxable year, then (1) no deduction otherwise allowable under this chapter because of the rental use of such dwelling unit shall be allowed, and (2) the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer under section 61.

The question is whether the homeowner can legitimately claim that the hundreds of thousands of dollars worth of improvements, appliances, goods, etc. are really rental income.
Thanks. That's interesting. Yeah, it sounds like they have found one of those technicalities that the IRS will litigage to death and then if necessary, get congress to close. If it is too good to be true, the IRS will make sure you can't do it.
     
ManOfSteal  (op)
Addicted to MacNN
Join Date: Aug 2004
Location: Outfield - #24
Status: Offline
Reply With Quote
Oct 2, 2004, 11:35 AM
 
Very interesting loophole/rule you found Joshua...thanks for sharing the information!
     
dtriska
Mac Elite
Join Date: Sep 2000
Location: Canada
Status: Offline
Reply With Quote
Oct 3, 2004, 05:30 AM
 
Originally posted by SimeyTheLimey:
But if the gift is big enough, it could throw you into a higher tax bracket, and then that higher marginal rate will apply to your entire income.
Are you serious? In the US, if your total income is in a high tax bracket, your entire income gets taxed at that bracket's rate? In Canada, the income in each bracket is taxed at only that bracket's rate (ex: if the cut-off for a bracket is $30 000, and I make $30 001, only the extra $1 will be taxed at the higher rate).

From what I understand, lottery winnings and the like are subject to zero taxation in Canada. And, I think gifts are tax-free as long as they don't exceed $10 000.

Originally posted by macroy:
Wow... the tax is based on the MSRP? That sucks.... especially when you rarely pay MSRP for a car. You would think it'd be the invoice of the car.
The cars were donated by a dealership, so, for tax purposes, the cars are taxed at MSRP, I'd imagine.
     
Diggory Laycock
Professional Poster
Join Date: Oct 2001
Location: London
Status: Offline
Reply With Quote
Oct 3, 2004, 05:39 AM
 
In the UK - prizes are not not taxable - that includes Casino wins.
     
SimeyTheLimey
Posting Junkie
Join Date: Mar 2002
Location: Alexandria, VA
Status: Offline
Reply With Quote
Oct 3, 2004, 09:43 AM
 
Originally posted by dtriska:
Are you serious? In the US, if your total income is in a high tax bracket, your entire income gets taxed at that bracket's rate?
Not at that bracket. At that marginal rate. The marginal rate is the average tax rate, and it is always lower than the bracket rate.

I'll set up a simple (and simplified) example. Suppose you have three brackets. 10, 20, 30 percent. The income brackets might look like this:

0 - 10,000 = no tax
10,001 - 20,000 = 10%
20,001 - 30,000 = 20%
30,001 - 40,000 and higher = 30%.

Suppose a person makes $18,000. They will pay nothing on the first $10,000 and 10% of the remaining $799. The marginal rate is $799 in income tax, or a marginal rate of 3.89%. Suppose that person gets a raise and now makes $25,000. The first $10,000 will be taxed at 0%, the next $10,000 at 10%, the additional $4,999 will be taxed at 20%. Total tax paid will be $10,000 x 10% = 1,000 and $4,999 X 20% = $999.80. The marginal rate will be 8%

The higher your income, the higher your marginal rate. If you make a windfall that throws you significantly into the highest bracket, your marginal rate and your total tax bill will go up considerably. Imagine you make $100,000 in my example. $59,999 of that would be taxed at 30%. Your marginal rate would be 21%. However, your income is always taxed by each bracket up to and including the highest bracket you occupy.
     
thePurpleGiant
Mac Elite
Join Date: May 2001
Status: Offline
Reply With Quote
Oct 3, 2004, 09:50 AM
 
Originally posted by Diggory Laycock:
In the UK - prizes are not not taxable - that includes Casino wins.
Out of interest - what is stopping your employer from not giving you any wages, and simply giving out a 'prize' of $2000 to each employee at the end of each fortnight? (tax free of course, since it's a prize for the best workers, which may or may not include every worker)

And what about Capital Gains Tax then?
     
Randman
Posting Junkie
Join Date: Mar 2004
Location: MacNN database error. Please refresh your browser.
Status: Offline
Reply With Quote
Oct 3, 2004, 10:03 AM
 
I don't know if it's still true, but most game shows offered the option of collecting the prize won, or the money equal to the value of the car.
I know on price is right a few years ago, few people actully took the cars because they had to meet California emissions standards.
Now, in a casino in the US, if you win money over a certain amount, you have the tax taken out right away and have to deal with the slight paperwork before you even collect.

This is a computer-generated message and needs no signature.
     
TETENAL
Addicted to MacNN
Join Date: Aug 2004
Location: FFM
Status: Offline
Reply With Quote
Oct 3, 2004, 10:16 AM
 
Originally posted by thePurpleGiant:
Out of interest - what is stopping your employer from not giving you any wages, and simply giving out a 'prize' of $2000 to each employee at the end of each fortnight? (tax free of course, since it's a prize for the best workers, which may or may not include every worker)

And what about Capital Gains Tax then?
It's something different if your employer gives you a "prize" or a "gift". Such a gift is a "benefit in money's worth" and taxable in Germany. There is also a tax on capital gains in Germany.

I don't think there is a tax on real prizes and gifts in Germany. I haven't seen this when filling out my tax declaration. It doesn't seem right to me.
     
Spliffdaddy
Posting Junkie
Join Date: Oct 2001
Location: South of the Mason-Dixon line
Status: Offline
Reply With Quote
Oct 3, 2004, 11:19 AM
 
And all you Americans that did not pay taxes for out-of-state internet purchases will owe sales tax on those items. You're supposed to declare those purchases on your state tax return. This is true for any goods bought outside your state for use IN your state. States are not required to collect state taxes for other states - so it's up to you to pay them on your own. If you are charged a sales tax in the state where the purchase was made - but you intend to use the item in another state - you must pay the sales tax for the state in which you intend to use the item...and ask for a refund for the taxes paid to the state where you bought the item. Confused yet? I learned the hard way. I built an entire HOUSE in one state, using materials bought in another state. ouch.

PS, the homeowners that receive a 'Moster House' type windfall will owe capital gains gains tax when the house is sold...assuming there's an increase in its value. Some 'home-related' capital gains are exempt to a certain point. Check the tax codes. It's a 770 page book.

edited:

I learned a lot about taxes from my father. He worked as a district manager for AT&T and Bell Labs the whole time I was growing up. He used to actually read those 700 page tax manuals. While a bit more difficult to do nowadays, we always maintained a 'farm' (by strict definition) that never managed to produce anything - but, nonetheless was profitable. I'm not clear on the details, but I remember something about 'depreciation' of farm assets'. We had to show an operating profit (depreciation handles that) AND *sell* something about every 3 years. So we'd buy a steer (young beef cow) and let it graze for a while - then sell it.

To put it simply, he was pre-paying most of the income taxes he was going to be paying from his salary as a manager by purchasing farm machinery. Instead of paying $20,000 in income taxes over the next, say, 3 years - he would buy a $20,000 tractor and become eligible for depreciation-related tax credits that exceeded the initial $20,000 investment. It was a way of paying $20,000 up front to avoid a tax liability of $30,000 anticipated in the near future. And you got to keep the tractor when it was all done.

Ever noticed how wealthy folks always have a 'ranch' somewhere?
( Last edited by Spliffdaddy; Oct 3, 2004 at 12:50 PM. )
     
amsalpemkcus
Mac Elite
Join Date: Jun 2002
Location: Where Lysimachia mauritiana blooms
Status: Offline
Reply With Quote
Oct 3, 2004, 11:25 AM
 
manofsteal has 8 childeren!!?
     
ManOfSteal  (op)
Addicted to MacNN
Join Date: Aug 2004
Location: Outfield - #24
Status: Offline
Reply With Quote
Oct 3, 2004, 01:02 PM
 
Originally posted by amsalpemkcus:
manofsteal has 8 childeren!!?
     
dtriska
Mac Elite
Join Date: Sep 2000
Location: Canada
Status: Offline
Reply With Quote
Oct 3, 2004, 09:14 PM
 
Originally posted by SimeyTheLimey:
Not at that bracket. At that marginal rate. The marginal rate is the average tax rate, and it is always lower than the bracket rate.

I'll set up a simple (and simplified) example. Suppose you have three brackets. 10, 20, 30 percent. The income brackets might look like this:

0 - 10,000 = no tax
10,001 - 20,000 = 10%
20,001 - 30,000 = 20%
30,001 - 40,000 and higher = 30%.

Suppose a person makes $18,000. They will pay nothing on the first $10,000 and 10% of the remaining $799. The marginal rate is $799 in income tax, or a marginal rate of 3.89%. Suppose that person gets a raise and now makes $25,000. The first $10,000 will be taxed at 0%, the next $10,000 at 10%, the additional $4,999 will be taxed at 20%. Total tax paid will be $10,000 x 10% = 1,000 and $4,999 X 20% = $999.80. The marginal rate will be 8%

The higher your income, the higher your marginal rate. If you make a windfall that throws you significantly into the highest bracket, your marginal rate and your total tax bill will go up considerably. Imagine you make $100,000 in my example. $59,999 of that would be taxed at 30%. Your marginal rate would be 21%. However, your income is always taxed by each bracket up to and including the highest bracket you occupy.
The marginal tax rate is not the same as the average tax rate. At least, not how I was taught. And, thanks for the example. Although I know how a progressive/marginal tax system works (hence the surprise at your post), it's probably good for others.
     
Fyre4ce
Mac Elite
Join Date: Nov 2000
Location: Los Angeles, CA
Status: Offline
Reply With Quote
Oct 3, 2004, 09:27 PM
 
Originally posted by SimeyTheLimey:
Here is another nice little wrinkle. Suppose the person giving you a gift tries to offset the tax consequences by paying your income taxes that you owe on the gift. Paying the income taxes for the other person is also taxable income to that person. They will still owe taxes on the money they were given to pay their taxes.
...and if you calculate the infinite series, you can figure out exactly how much the samaritan would have to pay so that the person can have the car and pay no tax!

Actually, this brings up another question: if the receiver must pay tax on the gift as if it were income, then shouldn't the giver not pay tax on the value of the gift? Perhaps this is the case - I don't know. One thing I don't like about the tax system is how money is taxed every time it changes hands - payroll tax, income tax, sales tax, estate tax, capital gains tax, etc. It's nuts. I am thinking it would be better to tax in fewer places.
Fyre4ce

Let it burn.
     
ManOfSteal  (op)
Addicted to MacNN
Join Date: Aug 2004
Location: Outfield - #24
Status: Offline
Reply With Quote
Oct 3, 2004, 09:35 PM
 
Originally posted by manofsteal:
Not to mention all the added electricity/gas/water bills to run these new makeover homes? I'm VERY curious as how this is done after the show/fact! Anyone have any ideas? I know they can mortgage the place some more, but some of them wouldn't be able to afford a higher monthly payment!
I'm replying to my own question...wow, that's good stuff! Anyway, I forgot that these people on the Extreme Makeover: Home Edition don't have a mortgage to pay anymore so they can use the extra "savings" to pay for the utilities and costs of running the new home.
     
Gankdawg
Professional Poster
Join Date: Oct 2001
Location: Pacific Northwest
Status: Offline
Reply With Quote
Oct 3, 2004, 09:48 PM
 
Originally posted by manofsteal:
don't have a mortgage to pay anymore
Maybe I missed something, but where did you learn that? I remember in one episode (the kids that lost both of their parents in Livermore, CA) they got their mortgage taken care of.
     
ManOfSteal  (op)
Addicted to MacNN
Join Date: Aug 2004
Location: Outfield - #24
Status: Offline
Reply With Quote
Oct 3, 2004, 10:04 PM
 
Originally posted by Gankdawg:
Maybe I missed something, but where did you learn that? I remember in one episode (the kids that lost both of their parents in Livermore, CA) they got their mortgage taken care of.
Oh, I could be wrong based off that episode then...since that is what I was referring to and I thought applied to everybody.
     
SimeyTheLimey
Posting Junkie
Join Date: Mar 2002
Location: Alexandria, VA
Status: Offline
Reply With Quote
Oct 4, 2004, 06:25 AM
 
Originally posted by Fyre4ce:
Actually, this brings up another question: if the receiver must pay tax on the gift as if it were income, then shouldn't the giver not pay tax on the value of the gift?
That's how it works as far as income tax is concerned. Gift tax is a different tax. You pay it on any gift you give over $11,000 unless the gift is qualified. A qualified gift is basically a gift between spouses or to charity.

Edit: Fyre4ce: Yup, you're right. The marginal rate is the rate on the last dollar owned. I misspoke when I referred to that as the average rate. However, I think even with the terminology error the example I gave shows the effect I had in mind. A person who suddenly gets a windfall will see the overall percentage of their income paid as income taxes jump dramatically.

In practice, it is even worse because a lot of deductions and credits phase out above a certain income. For example, last year as a result of a paid internship I lost the Lifetime Learning Credit. That was $2000 I kind of had plans for. An extreme (but increasingly common) example is people whose income tips them into the Alternative Minimum Tax system. That really needs to be fixed, imho. Actually, I think it needs to be abolished.
( Last edited by SimeyTheLimey; Oct 4, 2004 at 06:43 AM. )
     
hayesk
Guest
Status:
Reply With Quote
Oct 4, 2004, 10:25 AM
 
Originally posted by Diggory Laycock:
In the UK - prizes are not not taxable - that includes Casino wins.
Same as in Canada. Lottery, Sweepstakes, casino winnings, etc. are not taxable.
     
turtle777
Clinically Insane
Join Date: Jun 2001
Location: planning a comeback !
Status: Offline
Reply With Quote
Oct 4, 2004, 10:40 AM
 
Originally posted by amsalpemkcus:
manofsteal has 8 childeren!!?


Thanks for giving us a fince demonstration of you reading and comprehension abilities

-t
     
Millennium
Clinically Insane
Join Date: Nov 1999
Status: Offline
Reply With Quote
Oct 4, 2004, 10:59 AM
 
Originally posted by SimeyTheLimey:
That's how it works as far as income tax is concerned. Gift tax is a different tax. You pay it on any gift you give over $11,000 unless the gift is qualified. A qualified gift is basically a gift between spouses or to charity.
Last I checked the limit was $10,000, though they may have upped it. It's also worth noting that gift taxes are payed by the giver, not the recipient. A person can give many gifts in a year and not have to pay a tax, as long as each gift is worth less than $10,000.
You are in Soviet Russia. It is dark. Grue is likely to be eaten by YOU!
     
SimeyTheLimey
Posting Junkie
Join Date: Mar 2002
Location: Alexandria, VA
Status: Offline
Reply With Quote
Oct 4, 2004, 11:44 AM
 
Originally posted by Millennium:
Last I checked the limit was $10,000, though they may have upped it. It's also worth noting that gift taxes are payed by the giver, not the recipient. A person can give many gifts in a year and not have to pay a tax, as long as each gift is worth less than $10,000.
That's right. The gift tax is paid by the giver, not the recipient. This IRS publication covers the basic rules and explains that the current gift tax threshold is $11,000 for years 2002, 2003, and 2004: Link Basically, the statute contains a periodic adjustment mechanism.
     
dtriska
Mac Elite
Join Date: Sep 2000
Location: Canada
Status: Offline
Reply With Quote
Oct 5, 2004, 05:14 AM
 
Originally posted by SimeyTheLimey:
A person who suddenly gets a windfall will see the overall percentage of their income paid as income taxes jump dramatically.
While the percentage of your income paid as income taxes may jump, you're still better off with the added income. Unless, of course, the loss of deductions and credits is too great.

Ain't taxes fun?
     
   
Thread Tools
 
Forum Links
Forum Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Top
Privacy Policy
All times are GMT -4. The time now is 08:24 AM.
All contents of these forums © 1995-2017 MacNN. All rights reserved.
Branding + Design: www.gesamtbild.com
vBulletin v.3.8.8 © 2000-2017, Jelsoft Enterprises Ltd.,