In light of the recent Power Ball fever that swept the
nation, it left many wondering how some people who win the lottery, hit a
jackpot or have a few Oscar statuettes or Super Bowl rings in their possession
seem to go broke so easily. Besides sharing good fortune with family, friends
and charities, sometimes those winners forget about their long lost uncle -
Uncle Sam.
Donations to
qualified charities are one thing, but what happens if you share lottery
winnings with your siblings? They may be considered taxable gifts if you exceed
the exclusion amount.
What happens if you win an Oscar this month? Having that
statuette on your mantle is quite an honor but be careful with that “goodie
bag”…award season goodie bags are notorious for being worth thousands or even
tens of thousands of dollars and often come with strings attached. The IRS
could deem the recipients as “earning” the items and in that case they would
not be considered true gifts under IRS rules – it would be taxable income equal
to the fair market value of the goodie bag.
A coveted Super Bowl ring may not be worth a whole lot (then
again how can you really value bragging rights), but Pro Bowl and Super Bowl
earnings can catapult some players into an income tax bracket they aren’t
prepared to tackle during post-season. Generous gifts often follow victories so
again, taxable gifts need to be considered as well.
The bottom line is you’re never “too rich” or “too savvy” to
need sound tax planning guidance from a tax and distribution professional. Too
often people lose their fortune as quickly as they win it and don’t seek expert
advice until it’s too late.
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