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$321 MILLION: Mega Millions jackpot is red hot

Topic closed. 102 replies. Last post 2 years ago by AmoWin.

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Nassau
Bahamas
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Posted: November 2, 2014, 10:26 am - IP Logged

i only need one (1) million of the 321 million and I will be fine

    Teddi's avatar - Lottery-008.jpg

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    May 13, 2013
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    Posted: November 2, 2014, 10:30 am - IP Logged

    That's what I've always thought, but I've also wondered if the JP counts as income for the yr. when you claim it or when you won it?  If it's the latter, then I guess Uncle Sam will want the rest of his cut in just a few months.

    whiteballz: Someone might say you could use the extra year to get some interest income but one year CD rates at the bank are so laughably low it isn't even worth it. Waiting the extra year also gives state politicians extra time to pass a new law to tax lottery winnings even more.

    I guess I'm one of those "someones".  You're right about CD rates being laughably low, but I wouldn't agree w/ the "isn't even worth it" part.  Let's say the CV was 100 million (for simplicity's sake).  They'll take out 25%/25 million right away and you'll still have 14.6%/14.6 million to pay come tax time.  In this scenario, you'd have approx. 15 months until you had to pony up the rest.  Again, to simplify things, let's just call it a year (and also b/c of the CD term).   1-yr. jumbo CD rates are from 1-1.15% and once again, let's say 1% to simplify things.  1% of 14.6 million is 146,000 bucks. Since that figure will be added to the 14.6 million you'll owe, it too will be taxed at the highest rate, leaving you a little over 88k.  I suppose when you're talking a hundred million, that's not much in the grand scheme of things, but it will buy you a nice BMW or put in towards that pool or gourmet kitchen in your new home or for the A/V system for the man cave in your basement...or you can invest it again, maybe in something more risky that pays a lot more.    Even at .5% interest, it's still not chicken feed (unless you're like that chicken farmer who won a few months back and his winnings are going to allow him to keep his business)

    I'm inclined to agree. Even though the interest rate is seriously low, safely earning $1 is still a $1 more than zero. And when the amount being invested is in the millions then that's way way way more than zero.

    And I wouldn't even think of the interest earned in terms of a new BMW or Audi, I'd put the entire interest earned towards that tax bill and consider it that much less coming out of my original winnings.

      Teddi's avatar - Lottery-008.jpg

      United States
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      May 13, 2013
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      Posted: November 2, 2014, 11:13 am - IP Logged

      I'd rather pay the taxes in April of 2015 than April of 2016. You'll be paying 39.6% on any income over $413,000 either way.

      Someone might say you could use the extra year to get some interest income but one year CD rates at the bank are so laughably low it isn't even worth it. Waiting the extra year also gives state politicians extra time to pass a new law to tax lottery winnings even more.

      New Jersey just dodged a tax bullet recently: http://www.lotterypost.com/news/282151

      I doubt this will be the last time a politician will propose a new law to tax lottery winnings more and next time the law might pass. It's not just NJ, most states would love the extra tax revenue. The last time NJ passed a new law to tax lottery winnings more was July 2009 and the tax was retroactive back to January 1 2009. So it didn't matter if you won before the law was passed, you'd still be taxed.

      "N.J. Lottery goes from zero to highest tax rate in the USA"

      http://www.lotterypost.com/news/196448

      I'd pay the taxes as soon as possible and move to a tax friendly state or tax friendly jurisdiction.

      You know what, I had no idea about this retroactive tax law, but I've been saying for a while that something like this would happen and that's why I'd never take an annuity. Any time a state is short of funds, they'll pass a law to come after lottery winners. Lottery winners and smokers are the least sympathetic groups of people to hit with a tax. The rest of society would rather see them hit with a tax bill than for an entire state to experience a tax hike. I'm not going to deny that I'm a-ok with taxing nicotine products but I do have an issue with retroactive taxes on lottery winners simply because NJ wanted a cut of that >$200 million jackpot. 

      But it passed and other states will do the same whenever there is a budget shortfall because the majority of constituents won't be affected and won't care. Annuity payments are definitely going to be at risk. CV all the way.

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        NY
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        October 16, 2005
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        Posted: November 2, 2014, 11:41 am - IP Logged

        That's what I've always thought, but I've also wondered if the JP counts as income for the yr. when you claim it or when you won it?  If it's the latter, then I guess Uncle Sam will want the rest of his cut in just a few months.

        whiteballz: Someone might say you could use the extra year to get some interest income but one year CD rates at the bank are so laughably low it isn't even worth it. Waiting the extra year also gives state politicians extra time to pass a new law to tax lottery winnings even more.

        I guess I'm one of those "someones".  You're right about CD rates being laughably low, but I wouldn't agree w/ the "isn't even worth it" part.  Let's say the CV was 100 million (for simplicity's sake).  They'll take out 25%/25 million right away and you'll still have 14.6%/14.6 million to pay come tax time.  In this scenario, you'd have approx. 15 months until you had to pony up the rest.  Again, to simplify things, let's just call it a year (and also b/c of the CD term).   1-yr. jumbo CD rates are from 1-1.15% and once again, let's say 1% to simplify things.  1% of 14.6 million is 146,000 bucks. Since that figure will be added to the 14.6 million you'll owe, it too will be taxed at the highest rate, leaving you a little over 88k.  I suppose when you're talking a hundred million, that's not much in the grand scheme of things, but it will buy you a nice BMW or put in towards that pool or gourmet kitchen in your new home or for the A/V system for the man cave in your basement...or you can invest it again, maybe in something more risky that pays a lot more.    Even at .5% interest, it's still not chicken feed (unless you're like that chicken farmer who won a few months back and his winnings are going to allow him to keep his business)

        "I've also wondered if the JP counts as income for the yr. when you claim it or when you won it?"

        I think everybody realizes that you  can't just hang on to a paycheck for a month in order to claim income form that check in the following year. The IRS figured that one out a long time ago, so to prevent people from postponing income to which they're entitled they came up with the concept of "economic benefit" or "constructive receipt".   That means that the year in which any kind of income is taxable depends on when you  have "constructive receipt":
        "income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is
        credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn
        upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the
        taxpayer's control of its receipt is subject to substantial limitations or restrictions."

        Income being "otherwise made available" seems to make it clear that you gain constructive receipt the moment the drawing makes your ticket a winner, subject to any "substantial limitations or restrictions". That you almost certainly have to wait until at least 8 or 9 AM on the next business day to even present the ticket at a lottery office is clearly a substantial limitation on your ability to collect. That it will take some time for the lottery to finish their process to actually make funds available is a restriction that postpones constructive receipt a bit longer. Exactly how long isn't necessarily simple.

        Until recently I've figured that you can't postpone constructive receipt beyond the minimum time it would take for the lottery to actually make payment if you presented the ticket shortly after the drawing, because voluntarily sitting on your ass for 6 months before presenting a winning ticket is a choice rather than a  substantial limitation or restriction. That would probably mean that a prize won in November or December is taxable in the following year, while a prize won earlier in the year is taxable in that year, and in general, when there's a dispute between the IRS and a taxpayer the IRS takes the position that income became taxable in the year before the taxpayer wants to declare the income.

        On at least one occasion the IRS and a taxpayer have taken opposite positions. On 12/12/1992 Roy Thomas won the $9 million Ohio Super Lotto jackpot. At that time lottery winnings were taxed at a top rate of 20%, but that rate increased to 28% on January 1st, 1993. Thomas actually collected the money (less withholding, of course) on 1/28/93, but claimed the income on his '92 tax return on the theory that he gained constructive receipt when he became entitled to the prize in '92. The short version is that he lost, based on the Ohio lottery taking about 6 weeks to complete their process for making payment, but the details suggest, for multiple reasons, that the payment process may allow a winner to defer taxes by waiting to present the ticket.

        In ruling that Thomas didn't gain constructive receipt until '93 the court relied on details of constructive receipt that go beyond the simple concept I quoted above:

        • (1) There must be some fund in which money or property has been placed;
        • (2) The fund must be irrevocable and beyond the reach of the creditors of the party who transferred the funds to the escrow or trust; and
        • (3) The beneficiary must have vested rights to the money, with receipt conditioned only on the passage of time.

        In the case of Thomas, the Ohio lottery never put the prize money in a fund that was specifically for Thomas, transferring it through various funds that were used for other purposes and that weren't irrevocable.  The court also relied on the possibility that the lottery's validation process could have determined that Thomas' ticket wasn't a valid winner. If that had happened Thomas would never have been entitled to the money, and therefore would never have constructive receipt.

        Of course the procedure used at that time isn't necessarily still in place and other lotteries may have always used different procedures, so it's possible that some prize monies might be put into a fund that meets the requirements above. I've seen information in the past that indicated that the prize money for MM is actually invested in an annuity, which is then sold if the winner chooses the lump sum option. There may be an argument that the annuity is a fund for the sole benefit of the winner, but since the lottery is able to sell the annuity I don't think the fund meets the requirement to be irrevocable. I don't see any way around the need for the ticket to be validated as a the actual winning ticket.

        The argument against using those details to postpone taxes is that it goes completely against the entire purpose of constructive receipt, by allowing a taxpayer to voluntarily postpone income in order to postpone payment of taxes. I don't know if there's been a court case to clearly establish whether simply sitting on a ticket will allow you to postpone receipt.

        "you'd have approx. 15 months until you had to pony up the rest."

        That's not how it actually works. Even though 25% will be withheld before payment a lottery winner will be required to make estimated tax payments, just as is required for other income that isn't subject to regular withholding. Estimated taxes are paid quarterly, based on the expected annual income at the time of payment, with payments due on 4/15, 6/15, 9/15, and 1/15 of the following year. In the case of winning $100 million and having $25 million withheld, the remaining $15 million (rounded for simplicity) would be due as a $5 million payment on 9/15 and the final $10 million on 1/15. That means the best case scenario is collecting on January 1st and having 8 1/2 months to invest $5 million and  12 1/2 months to invest the $10 million. At the opposite end of the spectrum you might collect on 12/15 and get to invest the whole $15 million for a month.

        Considering that the choices are to invest in a manner that could result in losing principal or in a guaranteed but modest investment that could be more than wiped out by a modest increase in tax rates makes me think that trying to postpone taxes for a year is a gamble that's not worth the risk. I'm still waiting to find an outcome for a lawsuit challenging New Jersey's ability to retroactively impose a higher tax on winners who had already collected their prize, but I see absolutely no argument that you'd be exempt from an increase that only takes effect after you became entitled to claim the money.


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          Posted: November 2, 2014, 12:33 pm - IP Logged

          I really hope this one can get all the way to 1 billion!

          Won't ever happen.  When jackpots get really high it starts to become way too easy to win.

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            Portland, OR
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            Posted: November 2, 2014, 1:16 pm - IP Logged

            Edit:  NV, Drenick1 about the tax Q.  Got it.

            "Understand... people are more complicated than the masks they wear in society... everyone is playing to win, and some people will use moral justifications to advance their side"

                                                                                                                                                                      Robert Greene

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              New York, NY
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              Posted: November 2, 2014, 9:23 pm - IP Logged

              Todd must have jackpot fatigue lol. I remember when a jackpot reached 100 million , there would be an article written on it on lp.  Now it took the jackpot to reach over 300 mil to read something about it. First time in a long time I spend 10 dollars on megamillions. May the lottery gods make me rich.

                reddbrim's avatar - Lottery-067.jpg
                New Member
                fresno ,tx
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                Posted: November 2, 2014, 9:44 pm - IP Logged

                You have to play to win and I am playing, I dont know how much but I am playing.

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                  Republic of Texas
                  United States
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                  January 9, 2008
                  1095 Posts
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                  Posted: November 3, 2014, 11:48 am - IP Logged

                  "I've also wondered if the JP counts as income for the yr. when you claim it or when you won it?"

                  I think everybody realizes that you  can't just hang on to a paycheck for a month in order to claim income form that check in the following year. The IRS figured that one out a long time ago, so to prevent people from postponing income to which they're entitled they came up with the concept of "economic benefit" or "constructive receipt".   That means that the year in which any kind of income is taxable depends on when you  have "constructive receipt":
                  "income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is
                  credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn
                  upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the
                  taxpayer's control of its receipt is subject to substantial limitations or restrictions."

                  Income being "otherwise made available" seems to make it clear that you gain constructive receipt the moment the drawing makes your ticket a winner, subject to any "substantial limitations or restrictions". That you almost certainly have to wait until at least 8 or 9 AM on the next business day to even present the ticket at a lottery office is clearly a substantial limitation on your ability to collect. That it will take some time for the lottery to finish their process to actually make funds available is a restriction that postpones constructive receipt a bit longer. Exactly how long isn't necessarily simple.

                  Until recently I've figured that you can't postpone constructive receipt beyond the minimum time it would take for the lottery to actually make payment if you presented the ticket shortly after the drawing, because voluntarily sitting on your ass for 6 months before presenting a winning ticket is a choice rather than a  substantial limitation or restriction. That would probably mean that a prize won in November or December is taxable in the following year, while a prize won earlier in the year is taxable in that year, and in general, when there's a dispute between the IRS and a taxpayer the IRS takes the position that income became taxable in the year before the taxpayer wants to declare the income.

                  On at least one occasion the IRS and a taxpayer have taken opposite positions. On 12/12/1992 Roy Thomas won the $9 million Ohio Super Lotto jackpot. At that time lottery winnings were taxed at a top rate of 20%, but that rate increased to 28% on January 1st, 1993. Thomas actually collected the money (less withholding, of course) on 1/28/93, but claimed the income on his '92 tax return on the theory that he gained constructive receipt when he became entitled to the prize in '92. The short version is that he lost, based on the Ohio lottery taking about 6 weeks to complete their process for making payment, but the details suggest, for multiple reasons, that the payment process may allow a winner to defer taxes by waiting to present the ticket.

                  In ruling that Thomas didn't gain constructive receipt until '93 the court relied on details of constructive receipt that go beyond the simple concept I quoted above:

                  • (1) There must be some fund in which money or property has been placed;
                  • (2) The fund must be irrevocable and beyond the reach of the creditors of the party who transferred the funds to the escrow or trust; and
                  • (3) The beneficiary must have vested rights to the money, with receipt conditioned only on the passage of time.

                  In the case of Thomas, the Ohio lottery never put the prize money in a fund that was specifically for Thomas, transferring it through various funds that were used for other purposes and that weren't irrevocable.  The court also relied on the possibility that the lottery's validation process could have determined that Thomas' ticket wasn't a valid winner. If that had happened Thomas would never have been entitled to the money, and therefore would never have constructive receipt.

                  Of course the procedure used at that time isn't necessarily still in place and other lotteries may have always used different procedures, so it's possible that some prize monies might be put into a fund that meets the requirements above. I've seen information in the past that indicated that the prize money for MM is actually invested in an annuity, which is then sold if the winner chooses the lump sum option. There may be an argument that the annuity is a fund for the sole benefit of the winner, but since the lottery is able to sell the annuity I don't think the fund meets the requirement to be irrevocable. I don't see any way around the need for the ticket to be validated as a the actual winning ticket.

                  The argument against using those details to postpone taxes is that it goes completely against the entire purpose of constructive receipt, by allowing a taxpayer to voluntarily postpone income in order to postpone payment of taxes. I don't know if there's been a court case to clearly establish whether simply sitting on a ticket will allow you to postpone receipt.

                  "you'd have approx. 15 months until you had to pony up the rest."

                  That's not how it actually works. Even though 25% will be withheld before payment a lottery winner will be required to make estimated tax payments, just as is required for other income that isn't subject to regular withholding. Estimated taxes are paid quarterly, based on the expected annual income at the time of payment, with payments due on 4/15, 6/15, 9/15, and 1/15 of the following year. In the case of winning $100 million and having $25 million withheld, the remaining $15 million (rounded for simplicity) would be due as a $5 million payment on 9/15 and the final $10 million on 1/15. That means the best case scenario is collecting on January 1st and having 8 1/2 months to invest $5 million and  12 1/2 months to invest the $10 million. At the opposite end of the spectrum you might collect on 12/15 and get to invest the whole $15 million for a month.

                  Considering that the choices are to invest in a manner that could result in losing principal or in a guaranteed but modest investment that could be more than wiped out by a modest increase in tax rates makes me think that trying to postpone taxes for a year is a gamble that's not worth the risk. I'm still waiting to find an outcome for a lawsuit challenging New Jersey's ability to retroactively impose a higher tax on winners who had already collected their prize, but I see absolutely no argument that you'd be exempt from an increase that only takes effect after you became entitled to claim the money.

                  Nice research, Floyd. Thanks for the info. At this late in the year, it does not make sense to collect before the end of the year unless it is a pool with several winners. Given the time to set up trusts and various entities, 60 days is okay, but pushes things very close to the holidays with closed offices and people taking holiday. I'd try and collect within 30-60 days, but if whoever tax atty I hired says to wait... I'd wait.

                   

                  I'll be investing as usual, maybe add a few bucks more. Remember, Powerball has also crossed that $100 million cash threshold. I'm buying both. Plus my office lottery pool of 21 regulars kicks in at $100m, but we are playing MM at $3 each rather than PB at $6 each.

                   

                  This the the kind of jackpot that needs a single ticket holder just to rile up the cult of envy. Green laugh

                  face

                  singlewinnersinglewinnersinglewinner   

                    RJOh's avatar - chipmunk
                    mid-Ohio
                    United States
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                    March 24, 2001
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                    Posted: November 3, 2014, 1:26 pm - IP Logged

                    You have to play to win and I am playing, I dont know how much but I am playing.

                    Ditto, but first I plan to test my numbers on the local Classic Lotto (6/49) game.

                     * you don't need to buy more tickets, just buy a winning ticket * 
                       
                                 Evil Looking       

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                      NEW YORK
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                      Posted: November 3, 2014, 3:32 pm - IP Logged

                      Yeah it's hot enough- time to take that baby out of the oven!

                      $1 INVESTMENT TURNED INTO $321 MILLION.

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                        NEW YORK
                        United States
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                        Posted: November 3, 2014, 3:35 pm - IP Logged

                        I think I will participate in this draw. Thanks in advance to everyone who contributed to my pending winfall Wink

                        Going to be my first Mega Millions purchase of the year!

                        Ask and You Shall Receive.Good Luck.

                          Drenick1's avatar - villiarna
                          USA
                          United States
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                          Posted: November 3, 2014, 3:37 pm - IP Logged

                          $1 INVESTMENT TURNED INTO $321 MILLION.

                          A dollar and a dream along with a whole bunch of luck is all it takes.

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                            NEW YORK
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                            Posted: November 3, 2014, 3:41 pm - IP Logged

                            I'll be sure to send all the members of LP a post card from my new home in Saint Thomas when I win!Thumbs Up

                            Your jackpot fever has started. Do not spend $10,000 on Mega Millions tickets.

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                              NEW YORK
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                              Posted: November 3, 2014, 3:46 pm - IP Logged

                              A dollar and a dream along with a whole bunch of luck is all it takes.

                              $1 still has plenty of buying power. I wish you the best, may your dreams come true.