What are the tax implications of winning a car in CM raffle?
#21
Burning Brakes
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I asked the same question a few months back. There were answers given.
http://forums.corvetteforum.com/c6-c...cm-raffle.html
oz
http://forums.corvetteforum.com/c6-c...cm-raffle.html
oz
#22
Safety Car
IRS typical incremental rate 25% + CA tax rate 9.3% = 34.3% x $56,000 = $19,208
Sales tax 8.25% x $56,000 = $4,620
Total tax: $23,828 or about 43% of the retail value of the C6. Granted, sales tax is paid whether the car is purchased or won in a raffle.
BTW, the cost of the raffle ticket can be subtracted from the value of the prize. A small consolation.
Last edited by humvet; 10-03-2009 at 01:07 PM.
#24
Race Director
Did someone actually think that you would get a $50k car and the government would not want their fair share? They got to give it to the banks you know. If you can't afford the money up front, finance the amount you need using the car as collateral. If you can't afford the new loan, sell the car immediately and you should make a decent profit.
I could imagine someone getting audited by the IRS crying that they didn't think they had to pay about $10-15k in taxes. In the end you'll end up paying around $20k for a $50k car.
I could imagine someone getting audited by the IRS crying that they didn't think they had to pay about $10-15k in taxes. In the end you'll end up paying around $20k for a $50k car.
#26
Le Mans Master
Sales tax I can understand but I find it a bit odd that the CM would ask you to bring the income tax money. That is something we had to pay at tax time to the IRS, not when we received the car to the company who gave it to us! Maybe it is something specific to Kentucky state law...I would certainly talk with a competent tax attorney in my state about it before paying any money up front.
#27
Le Mans Master
Capital gains tax? Not sure about that but this is the way I see it:
IRS typical incremental rate 25% + CA tax rate 9.3% = 34.3% x $56,000 = $19,208
Sales tax 8.25% x $56,000 = $4,620
Total tax: $23,828 or about 43% of the retail value of the C6. Granted, sales tax is paid whether the car is purchased or won in a raffle.
BTW, the cost of the raffle ticket can be subtracted from the value of the prize. A small consolation.
IRS typical incremental rate 25% + CA tax rate 9.3% = 34.3% x $56,000 = $19,208
Sales tax 8.25% x $56,000 = $4,620
Total tax: $23,828 or about 43% of the retail value of the C6. Granted, sales tax is paid whether the car is purchased or won in a raffle.
BTW, the cost of the raffle ticket can be subtracted from the value of the prize. A small consolation.
-In our case the full "fair market value" when new was tacked onto the top of our income and whatever taxable income was figured in whatever tax bracket that put us in was what we had to pay.
-Depending on who you win from, you may or may not have to pay sales tax. In our case, we didn't because the car was a prize directly from the manufacturer, so nobody ever bought it. The car dealer where it was delivered tried to charge us this tax but I talked with IRS officials and proved that I was right about not having to pay it. The dealer had never bought the car so there were no sales taxes to pass along to us. In the case of the CM, I could see having to pay them those taxes because they had to pay them also.
#28
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I won my 08 in a drawing at my old high school. Got a 1099 for about 44K, cost me about $10,500 in federal, state, and local taxes. No sales tax because I didn't buy the car. Worth every penny!
#29
Tech Contributor
We are all in different tax situations. I am retired, and have structured my situation so that I pay no income tax, although I have nine cars, two houses, and a large motor coach. I already have all the cars I want/need, so I have no interest in "winning" a car upon which I would have to pay income tax. And, yes, I do have an 09 Corvette which makes me happy.
#30
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Thats a good one. I was just trying to make the point that I asked the original question because I didn't know the answer. Now I do, thanks for the info.
#31
Race Director
I can't believe this question was asked. In one of my accounting classes, we discussed about the TV home repair shows, that when they turn a clunker of a house in to a masterpiece, the tax rate skyrockets, and results in the homelessness of the occupants on multiple occasions...
Now that sounds like America. Losing your house, that you were too poor to fix up, over taxes.
Give me a 2000 year old church state anytime. They only took ten per cent.
#33
It's 'Regular Income'.
You don't pay on wholesale value, or sticker value, you pay on what the people running the raffle put on the 1099 they issue you.
I don't know what value the Corvette Museum uses. I would hope it is the value that GM charges them for the car. I'm sure they don't get the car for nothing, they raffle off too many of them. But I also bet they get a super 'deal' on them
I won a car. A car I didn't want, a Ford Contour. The 1099 issued was about invoice price. Probably what they were able to buy the car for. Since I didn't want the car, I sold it immediately. It was a 'base' car, lowest model, 5-speed, AC and that was about all. I was not able to sell the car for as much as was stated on the 1099.
Calling the IRS, I got someone that was nice, plus intelligent. He told me since I never put the car 'into service' (drove it), it could be considered a Capital Gain, rather than Personal Property. And, since I lost money on it, I could claim a Short Term Capital Loss on it. I even lost so much that it exceeded the one year deduction, but I was able to spread the remainer to the next tax year. Which helped quite a bit. I know, complaining about paying tax on something completely free isn't very cool, but I am glad that I didn't have to pay tax on more than I was able to sell it for.
If you place the car in service, use it, you are going to pay taxes on it as an addition to regular income, then crunch the numbers thru the rest of the return.
You don't pay on wholesale value, or sticker value, you pay on what the people running the raffle put on the 1099 they issue you.
I don't know what value the Corvette Museum uses. I would hope it is the value that GM charges them for the car. I'm sure they don't get the car for nothing, they raffle off too many of them. But I also bet they get a super 'deal' on them
I won a car. A car I didn't want, a Ford Contour. The 1099 issued was about invoice price. Probably what they were able to buy the car for. Since I didn't want the car, I sold it immediately. It was a 'base' car, lowest model, 5-speed, AC and that was about all. I was not able to sell the car for as much as was stated on the 1099.
Calling the IRS, I got someone that was nice, plus intelligent. He told me since I never put the car 'into service' (drove it), it could be considered a Capital Gain, rather than Personal Property. And, since I lost money on it, I could claim a Short Term Capital Loss on it. I even lost so much that it exceeded the one year deduction, but I was able to spread the remainer to the next tax year. Which helped quite a bit. I know, complaining about paying tax on something completely free isn't very cool, but I am glad that I didn't have to pay tax on more than I was able to sell it for.
If you place the car in service, use it, you are going to pay taxes on it as an addition to regular income, then crunch the numbers thru the rest of the return.
#34
Safety Car
It's 'Regular Income'.
You don't pay on wholesale value, or sticker value, you pay on what the people running the raffle put on the 1099 they issue you.
I don't know what value the Corvette Museum uses. I would hope it is the value that GM charges them for the car. I'm sure they don't get the car for nothing, they raffle off too many of them. But I also bet they get a super 'deal' on them
I won a car. A car I didn't want, a Ford Contour. The 1099 issued was about invoice price. Probably what they were able to buy the car for. Since I didn't want the car, I sold it immediately. It was a 'base' car, lowest model, 5-speed, AC and that was about all. I was not able to sell the car for as much as was stated on the 1099.
Calling the IRS, I got someone that was nice, plus intelligent. He told me since I never put the car 'into service' (drove it), it could be considered a Capital Gain, rather than Personal Property. And, since I lost money on it, I could claim a Short Term Capital Loss on it. I even lost so much that it exceeded the one year deduction, but I was able to spread the remainer to the next tax year. Which helped quite a bit. I know, complaining about paying tax on something completely free isn't very cool, but I am glad that I didn't have to pay tax on more than I was able to sell it for.
If you place the car in service, use it, you are going to pay taxes on it as an addition to regular income, then crunch the numbers thru the rest of the return.
You don't pay on wholesale value, or sticker value, you pay on what the people running the raffle put on the 1099 they issue you.
I don't know what value the Corvette Museum uses. I would hope it is the value that GM charges them for the car. I'm sure they don't get the car for nothing, they raffle off too many of them. But I also bet they get a super 'deal' on them
I won a car. A car I didn't want, a Ford Contour. The 1099 issued was about invoice price. Probably what they were able to buy the car for. Since I didn't want the car, I sold it immediately. It was a 'base' car, lowest model, 5-speed, AC and that was about all. I was not able to sell the car for as much as was stated on the 1099.
Calling the IRS, I got someone that was nice, plus intelligent. He told me since I never put the car 'into service' (drove it), it could be considered a Capital Gain, rather than Personal Property. And, since I lost money on it, I could claim a Short Term Capital Loss on it. I even lost so much that it exceeded the one year deduction, but I was able to spread the remainer to the next tax year. Which helped quite a bit. I know, complaining about paying tax on something completely free isn't very cool, but I am glad that I didn't have to pay tax on more than I was able to sell it for.
If you place the car in service, use it, you are going to pay taxes on it as an addition to regular income, then crunch the numbers thru the rest of the return.
#35
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The NCM will report a stated value to the IRS. You don't have to accept that value if you can justify with a written statement filed with your return, that you would have been able to purchase the vehicle from a dealer for a lower cost. Of course you might have to pay the tax upfront, upon delivery, based on the NCM stated value, and wait until filing time to recoup some of that upfront tax you paid.
#36
Burning Brakes
What happens if you just tell them you don't want it? I understand some raffles will give you some kind of cash equivalent. Unless the prize was "grossed up", I'd probably pass or just not enter the raffle at all!
RMX
RMX
#37
Burning Brakes
Does anyone have an idea what kind of tax liability you'd be facing if you won the two cars being given away at winthevettes.com? Considering they're going to be awarded at the end of the year, you'll have to come up with the funds in a few months.
Not a bad problem to have, mind you...I would sell the ZR1 and keep the 67. I figure a person could get good coin for a "1 of 1" ZR1.
EDIT: oops just read their rules...grand prize winner must SHOW UP WITH THE MONEY prior to taking possession of the cars.
RMX
Not a bad problem to have, mind you...I would sell the ZR1 and keep the 67. I figure a person could get good coin for a "1 of 1" ZR1.
EDIT: oops just read their rules...grand prize winner must SHOW UP WITH THE MONEY prior to taking possession of the cars.
RMX
Last edited by REMIX; 10-04-2009 at 06:37 PM.
#38
Le Mans Master
Does anyone have an idea what kind of tax liability you'd be facing if you won the two cars being given away at winthevettes.com? Considering they're going to be awarded at the end of the year, you'll have to come up with the funds in a few months.
Not a bad problem to have, mind you...I would sell the ZR1 and keep the 67. I figure a person could get good coin for a "1 of 1" ZR1.
RMX
Not a bad problem to have, mind you...I would sell the ZR1 and keep the 67. I figure a person could get good coin for a "1 of 1" ZR1.
RMX
#39
Burning Brakes
RMX