Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 07-05-2017, 02:45 PM
Junior Member
 
Join Date: Jul 2017
Posts: 1
$5 Million Lottery Win

My friend won $5 million on the Mega Million. We have a partnership and I get 1% of the prize money. Can you explain the tax situation for both of us? Thanks.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 07-06-2017, 01:19 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
Quote:
Originally Posted by dcleb13 View Post
My friend won $5 million on the Mega Million. We have a partnership and I get 1% of the prize money. Can you explain the tax situation for both of us? Thanks.
In general, the federal government taxes prizes, awards, raffle and lottery winnings, and other similar types of income as ordinary income, no matter the amount. This is true even if you did not make any effort to enter in to the running for the prize. Your state will tax the winnings too, unless you live in a state that does not impose a state-level income tax.
The tax rate will be determined by your income;
As he wins and gives shares to you, he has made gift of a significant amount of money and can expect to file form 709 with the IRS for the gift . and you donot need to pay tax on the gift of 1% of the $5M mega mil.
You could certainly set up an LLC and claim through that, but it won't protect you. If ownership isn't established before a ticket becomes a winner, then you've still got the IRS' assumption that there is only one owner who made gifts after they won. An LLC won't protect your assets, either. An LLC only protects the members against personal liability for the actions of the LLC.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
If I donate lottery ticket before the drawing- what the tax implication? RaviChr Itemized Deductions 1 05-15-2017 03:08 PM
LLC vs. S Corp with $10 million in profit jacksonp2015 S-Corporation 0 02-25-2017 12:12 PM
Withholding on Lottery Income [email protected] Income 0 11-19-2009 12:11 PM
First-Time Homebuyer Credit Provides Tax Benefits to 1.4 Million Families to Date Samatg General 0 09-17-2009 11:59 PM
lottery winnings emarvey Miscellaneous 1 01-18-2009 01:42 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.