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So. My duaghter just won a new Camaro

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So. My duaghter just won a new Camaro

Old 07-07-2013, 01:17 PM
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Default So. My duaghter just won a new Camaro

She had the lucky ticket in a local chamber of commerce drawing for a 2013 camaro.
Now they are wondering what taxes they will have to pay on it and how much. Is there sales tax on a "gift"?
What's the percentage on the gift tax and how is that calculated? New MSRP? Average dealer sales price?
Old 07-07-2013, 01:21 PM
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Whatever the sticker price was.
It is not a "gift"
It is unearned income
Sales tax
Michigan income tax
and Federal income tax
all on sticker price.
Old 07-07-2013, 01:28 PM
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Well congratulations!

Never won one but out of couriousity my wife and I figured it all adds up to about 30% of sticker.
Old 07-07-2013, 01:28 PM
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Taxes will probably be enough to buy a used camaro.
Old 07-07-2013, 01:31 PM
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I think if she doesn't plan on keeping it she can use the cost basis for what it was sold for. I believe there are a few cases that have tested this and won.

If she keeps it, as stated above full MSRP.

If she cant afford to pay cash, she should look at getting a loan for 1/3 the value if she intends to keep it.

Nothing like a free car!
Old 07-07-2013, 01:39 PM
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In 2005, my son won a house in Georgia in a drawing for St Judes Childrens Hospital. The house was valued by the builder at $325,000. He had to pay taxes on that amount as unearned income since the IRS considers all raffles as a form of gambling. This tax bracket was in the HIGH 30 percentile The IRS offered him a payment plan in the form of a lien. An accountant advised him to get a mortgage since a lien from the government, with or without on time or early payoff according to this accountant, is NEVER removed from your credit rating and will always be there to adversely affect your credit rating. Also, the great state of Georgia also put their fingers in the pie the following year using the same tax theory. The builder offered him a cash buyout of $275,000 which he didn't take, but the tax burden would of been the same percentages either way.
Talk to an accountant, pay the taxes up front even if it's necessary to take a loan to do so. the car itself should be of sufficient collateral to cover a loan to pay the taxes. Never let the government have the upper hand on you.
Old 07-07-2013, 01:40 PM
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up here fed taxs state tax reg and plates
Old 07-07-2013, 03:41 PM
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Originally Posted by togster2 View Post
In 2005, my son won a house in Georgia in a drawing for St Judes Childrens Hospital. The house was valued by the builder at $325,000. He had to pay taxes on that amount as unearned income since the IRS considers all raffles as a form of gambling. This tax bracket was in the HIGH 30 percentile The IRS offered him a payment plan in the form of a lien. An accountant advised him to get a mortgage since a lien from the government, with or without on time or early payoff according to this accountant, is NEVER removed from your credit rating and will always be there to adversely affect your credit rating. Also, the great state of Georgia also put their fingers in the pie the following year using the same tax theory. The builder offered him a cash buyout of $275,000 which he didn't take, but the tax burden would of been the same percentages either way.
Talk to an accountant, pay the taxes up front even if it's necessary to take a loan to do so. the car itself should be of sufficient collateral to cover a loan to pay the taxes. Never let the government have the upper hand on you.
good post; good information about credit rating being affected the way it is by any governmental lien. Making a payment plan into a lien sounds shady, too, because the average bear wouldn't ask an accountant for any downside to what would appear to be a normal business practice.
Old 07-07-2013, 03:52 PM
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If I won anything of value, my first call would be my lawyer.

that was a great post above about the house, but the Value would concern me. I would suspect there is something positive in it for the builder inflating the Value.

As far as the car is concerned, I'd still call my lawyer and let his staff work with my accountant before I did anything.

I've never won anything but a single square in a super bowl pool, which I promptly claimed as income and paid taxes So take my advice for what you think its worth
Old 07-07-2013, 03:54 PM
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Originally Posted by DoubleO7 View Post
Whatever the sticker price was.
It is not a "gift"
It is unearned income
Sales tax
Michigan income tax
and Federal income tax
all on sticker price.

Dead on, most will offer a cash equivielant in lieu of car
Old 07-07-2013, 04:29 PM
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AFAIK, They will basically owe taxes as if she bought the car, plus taxes as if the MSRP of the car were w2 income.

It is still a net gain. Lets put it this way, she didn't win a free car, she won a $30k car for 10k. She can drive it "free" for 3-5 years and then sell it and break even. If she just doesn't want the thing, she can probably work something out with the dealer for a cash prize or maybe trade sideways for something else. I also suspect the dealership could work out new car financing for the $10k or so. (Or just take delivery and refi it)
Old 07-07-2013, 04:32 PM
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Originally Posted by Flot View Post
AFAIK, They will basically owe taxes as if she bought the car, plus taxes as if the MSRP of the car were w2 income.
It's unearned income, not w2. No FICA.
Old 07-07-2013, 04:33 PM
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Originally Posted by Crabpot Man View Post
It's unearned income, not w2. No FICA.
Oops good point, I was thinking more about tax bracket...
Old 07-07-2013, 07:32 PM
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28 % in texas I believe of its value.
Old 07-07-2013, 07:39 PM
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but the Value would concern me.

Value will be whatever the Chamber puts on the 1099-Misc. Somehow, I doubt your lawyer will have much to do with it unless the Chamber doesn't do it IAW IRS regs ... ;?
Old 07-07-2013, 07:43 PM
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congratulations get a tax lawyer and save yourself a lot of monry and trouble.
Old 07-08-2013, 03:21 AM
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Originally Posted by oceanelectric1 View Post
congratulations get a tax lawyer and save yourself a lot of monry and trouble.

You don't need a tax lawyer for that, pretty simple

And yes you will get a 1099 Misc listed as Other Income for retail price, not much to do but pay the tax.
Old 07-08-2013, 03:39 AM
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I believe you can adjust the MSRP that is reported on the 1099 if you can prove that the actual fair market value is lower. Not many vehicles sell at MSRP. A search of case law should find the answer.
Old 07-08-2013, 05:15 AM
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Originally Posted by togster2 View Post
He had to pay taxes on that amount as unearned income since the IRS considers all raffles as a form of gambling. This tax bracket was in the HIGH 30 percentile The IRS offered him a payment plan in the form of a lien.
If the IRS considers raffles a form of gambling would a person be able to write off the expense of other gambling dept, such as lottery etc, against the car? Cool win BTW, congrats.
Old 07-08-2013, 05:19 AM
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Talk to delivering dealer if she doesnt want it. They will take it in on"trade" and give you the money for your car. There will be taxes but it never comes out of your pocket. If its worth 30k and taxes are 6k she will walk with a 24k check. Had a friend win a Tahoe he didnt want and this is how he handled it.

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