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Will the Puerto Rico Powerball winner pay Federal tax? Nobody knows

PowerballPowerball: Will the Puerto Rico Powerball winner pay Federal tax? Nobody knows
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For the first time ever, Puerto Rico has a Powerball winner — with a whopping $188 million jackpot. And the island is celebrating.

The winning ticket holder will get one-third of the $564 million jackpot, the third-largest in Powerball history and the fifth-largest U.S. lottery prize.

But one mystery remains — will the winner pay federal taxes on the prize, or will he or she be exempt, as has always been the case there? Lottery officials in Puerto Rico said they still have no answer to that question.

Powerball only started operating on the U.S. territory in October of last year and the near miraculous win has surprised everyone — including the Puerto Rican Lottery (Loteria de Puerto Rico).

"We asked the IRS that same question in October, but we haven't received an answer yet," Antonio Perez Lopez, Assistant Secretary of the Lottery in Puerto Rico, told Fox News Latino. "We are still waiting, so we don't know."

IRS officials did not immediately respond to calls seeking comment.

Puerto Rico's tax code exempts Puerto Ricans from paying federal taxes on local income. The island has the discretion to set the local tax.

This peculiarity has been a magnet for U.S. millionaires, who increasingly are finding ways to spend at least 183 days a year on the island in order to become a "bona fide resident" and benefit from Section 933 of the U.S. tax code, which exempts residents of Puerto Rico from paying U.S. income tax on their Puerto Rico-sourced income.

The winner will definitely have to pay a 20 percent state taxes to comply with a 1989 lottery law that requires them to pay taxes based on how much they win. But if they have to pay federal taxes on top of the state tax, they would pay at least an additional 25 percent of their earnings to the IRS.

What is unclear is whether Powerball lottery winnings would qualify as "income received from sources outside Puerto Rico" and would be subject to paying local taxes or whether it would be considered a "local source" because the ticket was purchased in Puerto Rico.

According to the FAQ section on Powerball's website, "federal tax is deducted from your lottery winnings before you receive your payment." There is no disclaimer for Puerto Rico or exceptions for Puerto Rico in this explanation.

Gabriel Hernandez, a tax partner with the San Juan office of BDO Puerto Rico, said the "source" is where the ticket was purchased and the rules that apply are the ones of the state.

"Therefore, here it applies the maximum rate of 20 percent in Puerto Rico and tax-free for federal purposes," he said.

As of midday Thursday, nobody had yet claimed the prize at the Shell gas station, in Ponce, where the Powerball ticket was sold. There is always the chance, of course, that the ticket holder is a tourist or non-resident and therefore would not luck out on the tax exempt.

According to Perez, the lottery official, the highest lottery ever won in the island was $32 million, three years ago.

Yomari Rentas, one of the clerks at the Shell gas station in Ponce, said nobody in the business, including the owner, is aware if the store will receive any money for selling the winning ticket.

Puerto Rico lottery officials say the winner can choose between a lump sum payment of $101.6 million or 30 payments over 29 years.

The other winners of Wednesday night Powerball are in North Carolina and Texas.

Thanks to joshuacloak for the tip.

Fox News Latino

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29 comments. Last comment 2 years ago by BellasBMWLucki.
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mypiemaster's avatar - 2015021003pileofcash
JACKPOT HUNTER

United States
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April 2, 2013
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Posted: February 13, 2015, 7:53 am - IP Logged

I hope he/she is exempt. America should do away with taxes on lottery winnings{NICE TRY/WISHFUL THINKING}. A lot of countries around the globe do not tax lottery winnings but I have a feeling that the good ol' U.S. of A, will be the last to go that route.

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****

    OldSchoolPa's avatar - Lottery-057.jpg
    Gurnee, Illinois
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    February 12, 2007
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    Posted: February 13, 2015, 7:59 am - IP Logged

    I hope he/she is exempt. America should do away with taxes on lottery winnings{NICE TRY/WISHFUL THINKING}. A lot of countries around the globe do not tax lottery winnings but I have a feeling that the good ol' U.S. of A, will be the last to go that route.

    If America elected me president, there would be no IRS or tax on income of any kind. I would also legalize marijuana on federal level as well as prostitution. That is how you solve income inequality, prison overcrowding, and empowerment of women.

    Get MONEY!!! Winning a JACKPOT lottery is all the HOPE and CHANGE I desire!!!  NOW give me MONEY!US Flag

    The guy who won the presidency in 2008 really won the lottery...he is now millions richer, travels in first class style, and even has a staff that would be the envy of the richest Powerball winner (she has a staff of 2). Every night he goes to sleep, he probably plays the close of Dave Chappelle's Show: I'm rich beyatch!

      Gleno's avatar - Lottery-001.jpg
      New Jersey
      United States
      Member #80354
      September 25, 2009
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      Posted: February 13, 2015, 9:45 am - IP Logged

      Bet the Fed's will now decide real quick about a decision on collecting their Federal Income tax!!!

      Dance

        maximumfun's avatar - Lottery-030.jpg
        Lavender Rocket

        United States
        Member #124616
        March 16, 2012
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        Posted: February 13, 2015, 9:50 am - IP Logged

        What are the odds that the federal government will give up 25%+ to 39% of 1/3 of that ticket's value?  LOLOL yeah right.

          dpoly1's avatar - driver
          PA
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          October 16, 2008
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          Posted: February 13, 2015, 9:57 am - IP Logged

          Very interesting! Group Hug

          dpoly1 - Playing the lottery to save the jobs of those that build, transport, sell & maintain luxury items! -

           

          Eschew Poverty ........... Vote Conservative!

            Gleno's avatar - Lottery-001.jpg
            New Jersey
            United States
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            September 25, 2009
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            Posted: February 13, 2015, 10:06 am - IP Logged

            Giving  a further thought on this issue, in my opinion, the income was not technically generated from the local economy but from the Power Ball game which is based in the states.

            Also,the people in Puerto Rico collect Federal benefits so don't see how this windfall would be " exempt income", from Federal income taxes.

            Group Hug

              haymaker's avatar - Lottery-012.jpg
              Egg Harbor twp.south Jersey shore
              United States
              Member #112968
              June 29, 2011
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              Posted: February 13, 2015, 10:13 am - IP Logged

              Watch for the Feds to "pull a Jersey on em"

               

              Pulling a Jersey on em = making a retroactive tax when they realize how much $ they missed out on.

              That's how our 10.8 % state tax on lottery (the highest in the country) got started.

               

               

              Or since Puerto Ricans are exempt from paying Federal taxes on local income they'll say

              it's not local income since the $ came from all the states that are involved in the game.

               

              One way or another Uncle Sam will get his cut !

              Extraordinary Popular Delusions & the Madness of Crowds    -- Charles Mackay  LL.D.

                kreative1's avatar - flower2
                NE PA
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                May 10, 2012
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                Posted: February 13, 2015, 10:13 am - IP Logged

                I think this paragraph is interesting.....

                This peculiarity has been a magnet for U.S. millionaires, who increasingly are finding ways to spend at least 183 days a year on the island in order to become a "bona fide resident" and benefit from Section 933 of the U.S. tax code, which exempts residents of Puerto Rico from paying U.S. income tax on their Puerto Rico-sourced income.

                  dpoly1's avatar - driver
                  PA
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                  Posted: February 13, 2015, 10:31 am - IP Logged

                  I think this paragraph is interesting.....

                  This peculiarity has been a magnet for U.S. millionaires, who increasingly are finding ways to spend at least 183 days a year on the island in order to become a "bona fide resident" and benefit from Section 933 of the U.S. tax code, which exempts residents of Puerto Rico from paying U.S. income tax on their Puerto Rico-sourced income.

                  This is a smart move on the part of Puerto Rico!

                  dpoly1 - Playing the lottery to save the jobs of those that build, transport, sell & maintain luxury items! -

                   

                  Eschew Poverty ........... Vote Conservative!

                    Avatar
                    akron, ohio
                    United States
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                    February 7, 2015
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                    Posted: February 13, 2015, 2:13 pm - IP Logged

                    i would have to say it would be hard to live there 183 days out the year all u have to do is run from hurricanes a month or two other then that ur good.

                      HaveABall's avatar - rocket

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                      March 18, 2009
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                      Posted: February 13, 2015, 4:39 pm - IP Logged

                      i would have to say it would be hard to live there 183 days out the year all u have to do is run from hurricanes a month or two other then that ur good.

                      mrlottojackpot, did you mean to type: wouldn't be hard?

                      Having several millions of dollars in my financial accounts means receiving several valuable services each day!

                      Disney

                        HaveABall's avatar - rocket

                        United States
                        Member #72448
                        March 18, 2009
                        1228 Posts
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                        Posted: February 13, 2015, 4:43 pm - IP Logged

                        If America elected me president, there would be no IRS or tax on income of any kind. I would also legalize marijuana on federal level as well as prostitution. That is how you solve income inequality, prison overcrowding, and empowerment of women.

                        OldSchoolPa, why do you want to solve "empowerment of women" by sending more desperate women into a long-term job of prostitution and inevetable severe diseases and various abuse situations?  Do you hate/disdain females (children and adults)?

                        I believe the few women that are truly empowered, should be left alone by other folks ... to enjoy that rare lifestyle.

                        Having several millions of dollars in my financial accounts means receiving several valuable services each day!

                        Disney

                          Romancandle's avatar - moon
                          Upacreek
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                          December 8, 2012
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                          Posted: February 13, 2015, 8:14 pm - IP Logged

                          You gotta be kidding me... They haven't sorted out the tax implications yet?

                          -RC

                            HaveABall's avatar - rocket

                            United States
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                            March 18, 2009
                            1228 Posts
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                            Posted: February 13, 2015, 8:47 pm - IP Logged

                            You gotta be kidding me... They haven't sorted out the tax implications yet?

                            I Agree!, Romancandle, the Puerto Rico Lottery Headquarters didn't care about taxes before joining the Powerball lottery game!  [Oh, well, ho hum ... you have to possess a ticket to win.]  That probably instilles a lot of faith from their gambling citizens and visitors, doesn't it?

                            Hum, what other vital details didn't they care about?

                            Rant

                            Having several millions of dollars in my financial accounts means receiving several valuable services each day!

                            Disney