Ounce

I asked the same question a few months back. There were answers given.
http://forums.corvetteforum.com/c6-c...cm-raffle.html


oz

humvet

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.

walker3

A guy in our club won and when they called to tell him, they also told him to bring $20000 for taxes

phileaglesfan

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.

Maui

As others have stated, the winnings are viewed as income. Your liability will be dependent on your tax rate.

vettedoogie

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.

vettedoogie

-Me neither..never heard about that one.

-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.

Murf

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!

ncvette_1FUNRIDE

Oh, go ahead and enter the raffle. If you win, I'll buy it from you from $5000 over whatever the tax liability is and you'll come out $5000 to the good!

mgtr

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.

Rule292

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.

lh4x4

I believe that you pay income tax and whatever on the wholesale value of the prize.

bolivar

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.

humvet

Excellent post.

leimomi

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.

REMIX

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

REMIX

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

vettedoogie

Well, add probably $170k (or more depending on the value of the older Vette) right on top of your income and then figure what your income taxes would be on that figure. Then add whatever the sales tax was on both and add that in.

REMIX

That's just nuts. Guess I won't be entering this particular raffle.

RMX

Beverly Stayart

Thanks for this helpful info.