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$550 MILLION: Mega Millions holiday bonanza!

Topic closed. 220 replies. Last post 3 years ago by Viking Orayk.

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Jon D's avatar - calotterylogo
Los Angeles, California
United States
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January 5, 2011
1530 Posts
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Posted: December 16, 2013, 4:30 pm - IP Logged

First of all it isn't accurate that all state lotteries will allow multiple claimants.

I stand by what I said.  The most recent case is Dickerson v Commissioner where a Waffle House waitress was given a lottery ticket as a gift before the drawing (so the value of the gift was the price of the ticket), that ticket won, and she turned around and tried to split the ticket with family members giving herself 49% share.  They formed a corporation to share the ticket.  The court found there was no proof that there was any agreement in place before the drawing that the members would share any lottery wins and she ended up getting a bill for gift tax.  The tax court used criteria such as if there was a requirement that each family member buy lottery tickets, was there a pattern to purchases, and was there a predetermined formula used to determine the percentage each person received.

 
Another case was Estate of Winkler v. Commissioner.   Several years ago a family tried to share a lottery win.  The IRS went after the purchaser of the ticket for the gift tax.  In that case the court found that the family did have an agreement in place ( they would buy tickets and put them in a glass bowl at the parent's house if I remember correctly) and the IRS was denied the collection. 
 
I do agree that if you are lucky enough to win you should hire a good tax and estate planning attorney.

The Waffle house case had a few differences from normal partnership or trust claims:

- she was given the winning ticket by the customer, she did not buy it, and was deemed to have not acted on behalf of the group

- she formed an S Corp instead of a Trust, and some other complications that caused the ruling in favor of the IRS

    Avatar
    Columbus, OH
    United States
    Member #96391
    August 28, 2010
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    Posted: December 16, 2013, 4:30 pm - IP Logged

    I pray God's protection and wisdom over the winner(s).

      LottoLucy's avatar - hereslucy header.jpg

      United States
      Member #131594
      August 14, 2012
      171 Posts
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      Posted: December 16, 2013, 4:31 pm - IP Logged

      Right. Group wins don't require formal agreements before buying the ticket. It's nice, but not required.

      In single payee states, they can form a partnership for the group, after the win, but before the claim, so each person can get his own share of the winnings.

      Other states like CA will do multiple payee for group ownership claims, partnership not needed.

      You don't have to have a formal agreement in place before you win but if you are forced into tax court you will need to prove that the intent to share was there before the drawing.  The court has used a pretty consistent set of criteria to determine if a gift was made or not.

      Lotto Lucy

        Pita Maha's avatar - 940d8157 d1fb-4f70-a715-6ad04d915489.jpg
        SW Florida
        United States
        Member #145673
        August 11, 2013
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        Posted: December 16, 2013, 4:52 pm - IP Logged

        It's great having tax and finance savvy people on this forum.  Thanks for your input - you never know if one of us might need it. Thumbs Up

          mypiemaster's avatar - 2015021003pileofcash
          JACKPOT HUNTER

          United States
          Member #141034
          April 2, 2013
          1410 Posts
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          Posted: December 16, 2013, 5:23 pm - IP Logged

          It's great having tax and finance savvy people on this forum.  Thanks for your input - you never know if one of us might need it. Thumbs Up

          Caveat Emptor...with that kind of money, one can afford the best tax accountant/lawyer/financial advisor. Kind of dangerous to listen to faceless people on the internet.Type

          Seek and ye shall find -Matt. 7:7 ...Ask and ye shall receive -John 16:24 ...Give and it shall be given unto you -Luke 6:38 ...Be careful what you ask for!!! -Mypiemaster 1:1

          Having Money Solves Problems That Not Having Money Creates Yes Nod ****John Carlton****

            Teddi's avatar - Lottery-008.jpg

            United States
            Member #142499
            May 13, 2013
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            Posted: December 16, 2013, 6:10 pm - IP Logged

            Well that sucks. I just got my Masters degree and can't Find work in my field. My friends are struggling as well I was gonna pay off their student loans if I won

            You can still pay off their student loans as long as you pay Sallie Mae or whomever directly and do not give the student the money directly. Ditto with medical bills. Completely exempt as long as you pay the medical facility directly.

              Teddi's avatar - Lottery-008.jpg

              United States
              Member #142499
              May 13, 2013
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              Posted: December 16, 2013, 6:16 pm - IP Logged

              Good advice to enter into an agreement BEFORE the drawing if you want to give shares of your win to family and friends.  You have to be able to prove to the IRS that there was an agreement in place BEFORE the drawing to split any winnings.  The have been multiple court cases where the IRS sued the winner for gift tax, and in some cases won, because the person could not prove conclusively that there was an agreement to share before the drawing.  If you gve shares after the drawing that it considered a cash gift and is subject to gift tax.

              I have been told that the IRS looks particularly hard at winners who split a jackpot between more than husband and wife (no gift tax between spouses unless one of you is not a US citizen).

              If you don't have an agreement you can give away $5.34 in 2014 before any gift tax kicks in if you don't mind using your lifetime exclusion. That is still a lot of money to share!

              Sorry, but this is not really true. Perhaps in your state is the exception. But the IRS does not require you to "prove" you had an agreement to split the winnings ahead of time. All they have to do is claim the jackpot together and split the jackpot together. If they try to split the winnings AFTER the claim is when there's a problem and the lifetime gift tax goes into effect.

                Teddi's avatar - Lottery-008.jpg

                United States
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                May 13, 2013
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                Posted: December 16, 2013, 6:30 pm - IP Logged

                I Agree!

                This would be my thought..... to help out family and friends, buy or start a business,   with them on the payroll and give them "perks" like CEO have.

                "Corporate"...education, trips, condos, cars, retirement and health benefits.

                max out whatever tax benefits that you can from the business.

                Corporate bigwigs makes as much if not more on the perks and benefits, then they do from the paycheck.

                Over the years with the companies that I have work for, I have seen a lot of "Deadwood" on the payroll balance sheet !! some even put their time in

                at the office...... but most were paid to stay away.(owner's wife, brothers, sister)

                With the jackpot this BIG"..... you'll need a few tax write offs. US Flag

                I'm renting ($1) my dream until the drawing, hoping my "long shot" comes in!!

                                                               Bed

                Doing this will land you in court or jail. You cannot give your family money to start a business outside of the gift allowance unless either you have a partnership in the business or you charge them interest. And interest can't be a ridiculously low number either, it has to be at current permissable rates otherwise it's deemed as a gift and counts towards your lifetime exclusion or the yearly $14,000 per person. 

                You cannot hire a family member into your business and pay them an inflated salary either, otherwise it's considered a gift. For example, let's say you bought a McDonald's franchise and hired one family member to be the manager and another to be the cashier. You are not allowed to pay related-to-you-cashier $20/hr or whatever because that would be considered to be an inflated salary that is much more than industry standard and will be considered a gift. Ditto with paying the manager $100k/year.

                I've said this before, when you win or otherwise come into a large sum of money, you become the IRS' b*tch. They go over everything you do with a fine tooth comb. Why give them a bigger reason to take more of your money than you've already given them. Almost every thing that can be tried has, and I have yet to hear them losing a single court case they've brought against a lottery winner. In the end they get their money with fees and penalties tacked on.

                  Teddi's avatar - Lottery-008.jpg

                  United States
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                  May 13, 2013
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                  Posted: December 16, 2013, 6:48 pm - IP Logged

                  First of all it isn't accurate that all state lotteries will allow multiple claimants.

                  I stand by what I said.  The most recent case is Dickerson v Commissioner where a Waffle House waitress was given a lottery ticket as a gift before the drawing (so the value of the gift was the price of the ticket), that ticket won, and she turned around and tried to split the ticket with family members giving herself 49% share.  They formed a corporation to share the ticket.  The court found there was no proof that there was any agreement in place before the drawing that the members would share any lottery wins and she ended up getting a bill for gift tax.  The tax court used criteria such as if there was a requirement that each family member buy lottery tickets, was there a pattern to purchases, and was there a predetermined formula used to determine the percentage each person received.

                   
                  Another case was Estate of Winkler v. Commissioner.   Several years ago a family tried to share a lottery win.  The IRS went after the purchaser of the ticket for the gift tax.  In that case the court found that the family did have an agreement in place ( they would buy tickets and put them in a glass bowl at the parent's house if I remember correctly) and the IRS was denied the collection. 
                   
                  I do agree that if you are lucky enough to win you should hire a good tax and estate planning attorney.

                  Again, this is inaccurate. That waitress never bought the ticket, a regular customer (who was a trucker I believe) gave her the ticket. He always bought tickts and gave the waitresses the tickets as their tips. She was sued by her fellow coworkers because they claimed there was a verbal agreement that if ever they won they would split it. She said she was never in that agreement with them. Other than the word of the fellow waitresses, who might be seen to have a motive to lie, they could not prove that she had any arrangement with her. The ticket was in her possession, not theirs. IF she had wanted to split the money with them, she could have. She did not. She wanted it all for herself. The IRS has absolutely nothing to do with that lawsuit or that part of the story. 

                  Nxt, she then tried to get around the gift tax laws by forming a company on which her relatives could draw a 'salary' for doing absolutely nothing. She could not prove what the business did or what her employee/relatives did and that's why she had to fork over the taxes. It had absolutely nothing at all to do with her not having an agreement in place or not with her family members prior to the win, and everything to do with her trying to get around the gift tax laws. The IRS went after her for giving them what amounted to a monetary gift that she had not claimed on her taxes. She tried to claim that it wasn't a gift, it was their salaries, but she could not make that case because she had no real evidence other than forming the business to prove it was an actual operational business. THAT's why she lost. Absolutely nothing to do with her not being able to split the JP at the time of the win. She hadn't wanted to split it with them.

                    Teddi's avatar - Lottery-008.jpg

                    United States
                    Member #142499
                    May 13, 2013
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                    Posted: December 16, 2013, 7:06 pm - IP Logged

                    You don't have to have a formal agreement in place before you win but if you are forced into tax court you will need to prove that the intent to share was there before the drawing.  The court has used a pretty consistent set of criteria to determine if a gift was made or not.

                    This is simply not true. First of all, once you split the JP with someone, at the time of the claim, that intent is pretty darn clear. Second. Why would you be going to tax court? Unless you do not pay the taxes, you have no reason to go to tax court. The IRS doesn't care if that JP gets split 5 ways as long as you pay them. 

                    If you don't pay, you get audited, the auditor then tells you how much is owed and gives you a date to make payment. IF you don't make that payment THEN you are taken to court. There are a lot of steps between winning and being taken to court, and as long as you pay the taxes, it doesn't happen. You have to seriously and flagrantly break tax laws to go straight to court or get arrested. And unless you're Al Capone, chances are, it won't get to that point. 

                    It's not a gift if the parties claim together. It's only a gift if the money is tried to get divied out after the fact. At that point it doesn't matter if you intended to share it with them...unless you have seriously compelling evidence why it's a split and not a gift. But again...that is AFTER the fact. If that money hits your bank account and you THEN try to split it with someone, THAT'S the time you're up a creek without a paddle trying to prove what your intent was.

                      Viking Orayk's avatar - DiscoBallGlowing
                      New Member
                      Tennessee
                      United States
                      Member #149627
                      December 5, 2013
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                      Posted: December 16, 2013, 7:58 pm - IP Logged

                      Doing this will land you in court or jail. You cannot give your family money to start a business outside of the gift allowance unless either you have a partnership in the business or you charge them interest. And interest can't be a ridiculously low number either, it has to be at current permissable rates otherwise it's deemed as a gift and counts towards your lifetime exclusion or the yearly $14,000 per person. 

                      You cannot hire a family member into your business and pay them an inflated salary either, otherwise it's considered a gift. For example, let's say you bought a McDonald's franchise and hired one family member to be the manager and another to be the cashier. You are not allowed to pay related-to-you-cashier $20/hr or whatever because that would be considered to be an inflated salary that is much more than industry standard and will be considered a gift. Ditto with paying the manager $100k/year.

                      I've said this before, when you win or otherwise come into a large sum of money, you become the IRS' b*tch. They go over everything you do with a fine tooth comb. Why give them a bigger reason to take more of your money than you've already given them. Almost every thing that can be tried has, and I have yet to hear them losing a single court case they've brought against a lottery winner. In the end they get their money with fees and penalties tacked on.

                      You misinterpreted what I said............ I said (legally) maximize your tax advantage.

                      I did not say anything about paying a million dollars or excessive wages"

                      Believe it or not there are companies and corporations out there that do pay benefits and perks.

                      like matching your 401 K dollar for dollar or fully funded pension,

                      use of corporate housing.......that just happens to be on the Hilton Head Island

                      or a penthouse a New York City,

                      Company car, Company paid major medical health and dental. 

                      clothing allowance, educational reimbursement, on and on.

                      IF you were drawing a good salary and had all these things taken care, as part

                      of your empoyment pakage ...would you feel like you won the lottery? compared to the job you have now"

                      The key here is to legally maximize your options".....with several CPAs and tax attorneys to benefit and help family and friends,

                      Good luck !

                      integrity is doing what's right........ when nobody's watching"

                         
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