for fun: "Owners Raffle Off $3 Million Estate for $10"

Would love to know what the taxes are on this bad boy

I imagine the charity was necessary for them to legally hold on the raffle?

300K tickets need to be sold? prediction: won't happen.

"Would love to know what the taxes are on this bad boy"

$34,000/year.

and if you win, don't you have to pay income tax to the IRS on the $3 million? Who the heck can afford the income taxes? You'll have to sell and will never be able to live in the house.

Wouldn't the sellers need to pay taxes on the $2,999,990 of income? Technically, the winner is paying $10 for the house and the rest of the loot would be taxable?

nope, after they win the house, the buyer must declare the house as it was their income. So they buyer will have to pay about $1.2 million in taxes.

correction: $1.1 million in taxes on the current rate; $1.2 million on the new rate.

it's like winning the lottery. The WINNER pays the taxes, not the lottery commission.

The lottery doesn't pay taxes?

of course not. The lottery is run by the government. The government does not pay taxes to the government!

But that assumes the house is appraised at $3MM, I imagine the winner can argue it is worth much less in this environment, since clearly the owners would just sell it for $3 MM if they could. Either way, the taxes will be expensive, I don't see how you can get 300,000 people to enter a raffle like this. The prospective buyers in that FLA area can't be that large, and only a small percentage would want to waste their money in a lottery

still a great idea -- people are creative. Necessity is the mother of invention.

I am intrigued. Regarding the issue of income tax on the win, this is an interesting one. If you win cash in a lottery, you are required to pay income tax consistent with IRS regulations. Not sure if there is a subsection that deals directly with non-cash lottery winnings. If you can make it look like the lottery entrant is actually purchasing the property with the $10 entry fee, then there is really no income tax. Or possibly the lottery organizers are on the hook? There is no state income tax in FL so that is a factor. Also, there is a charitable contribution factor, so maybe this makes it tax exempt for the winner? I would consult with a lawyer. It would suck to win the place, be hit with the a huge tax bill, then not be able to sell the place to cover the tax bill.

i had a friend win a car at The Preakness years ago. he had to pay taxes on it...he subsequently sold it before setting foot in it.

when Oprah gave away the free cars, the winners had to pay taxes on it to the IRS. Some could not afford the taxes, so they put them on ebay.

> The lottery doesn't pay taxes?

Well, the lottery's "profit" is essentially a tax - it goes to gov revenue. $$$ in tickets sold minus payouts. Its like the house premium in vegas, but much bigger.

In terms of the amount they pay out, why would they be taxed on it?
Payout is an expense to them.

Would the winner be taxed on an appraisal or could they sell right away and pay taxes on the gain from the sale?

"Its like the house premium in vegas, but much bigger."

yes, but the casinos pay tax on the profit. I guess it makes sense that the government doesn't pay state tax, do they pay federal tax on lottery income?

"I am intrigued. Regarding the issue of income tax on the win, this is an interesting one. If you win cash in a lottery, you are required to pay income tax consistent with IRS regulations. Not sure if there is a subsection that deals directly with non-cash lottery winnings. If you can make it look like the lottery entrant is actually purchasing the property with the $10 entry fee, then there is really no income tax. Or possibly the lottery organizers are on the hook? There is no state income tax in FL so that is a factor. Also, there is a charitable contribution factor, so maybe this makes it tax exempt for the winner? I would consult with a lawyer. It would suck to win the place, be hit with the a huge tax bill, then not be able to sell the place to cover the tax bill."

The IRS has always had a practice of "adjusting" numbers they don't feel are "correct". They do "lifestyle audits" and charge you on income that they say you must have earned in order4 to life your lavish lifestyle even if they have no proof you actually earned it. They impute interest rates on private loans if they don't like the rate you have in you documents. All sorts of stuff.

But lets stop arguing ab out who pays taxes on lotto: it's just a flat fact that the Lotto winner pays, period, so all this talking about it is silly.

However, people often get screwed when they "win" stuff because the "prizes are valued at their list prices. So you see some poor slob on "The Price is Right" win a refrigerator that has a list price of $2,000, but he could get at some discount place for $900, he pays taxes on the $2,000. So, what you could have here is a guy paying $1.2 million in taxes on a place which ACTUALLY is worth $900,000 in the current market. Some win. Yes, you could have a nice argument with the IRS about what the place is really worth and spend a whole bunch of money of appraisals and attorneys proving the IRS wrong.

PS This is not the first time people have raffled off a house to sell it, it's been done a decent amount of times in the past. but be careful of The Producer's Syndrome: sell $3,000,000 in tickets on a house worth $2,000,000 and pocket an extra million over what you ever could have sold it for. It's like any carney where the prize you collect if you WIN is less than you paid to play the game.