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Pay/Hire Close Friends after Jackpot

Topic closed. 6 replies. Last post 10 years ago by KY Floyd.

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United States
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April 15, 2002
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Posted: December 5, 2006, 4:40 pm - IP Logged

Say you won a huge jackpot and wanted to help out your closest friends.  Not a 1 time payment, but maybe give them $100,000 a year for life.  Say you were going to do this for 3 friends, so $300,000/yr.

 Is there a way to do this without being hit with HUGE 'gift taxes' from the government?  Could you essentially 'hire' them like an employee and pay them for doing nothing?  What would be the best way to solve this problem?  

 P.S.  I'm not interested in giving them $12,000 or $13,000/year  (whatever the maximum non taxable gift is per year) 

    stavros's avatar - avatar 6898.gif
    Florida
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    Member #6147
    August 8, 2004
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    Posted: December 5, 2006, 5:20 pm - IP Logged

    Say you won a huge jackpot and wanted to help out your closest friends.  Not a 1 time payment, but maybe give them $100,000 a year for life.  Say you were going to do this for 3 friends, so $300,000/yr.

     Is there a way to do this without being hit with HUGE 'gift taxes' from the government?  Could you essentially 'hire' them like an employee and pay them for doing nothing?  What would be the best way to solve this problem?  

     P.S.  I'm not interested in giving them $12,000 or $13,000/year  (whatever the maximum non taxable gift is per year) 

    Well, if you "hired" them, you would both be liable for taxes on the salary.  Why would anyone need to know that you gave them a gift?

    Good Luck!

    Stavros

     


      United States
      Member #16612
      June 2, 2005
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      Posted: December 5, 2006, 6:45 pm - IP Logged

      If I win a jackpot, I first pay the taxes, then give out money to friends if I choose to.

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        California
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        October 1, 2006
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        Posted: December 5, 2006, 10:01 pm - IP Logged

        Well, if you "hired" them, you would both be liable for taxes on the salary.  Why would anyone need to know that you gave them a gift?

        stavros....regarding why anyone would need to know that you give in gifts, it is the law.  The tax code states that the person giving a gift, the giftor, must report any gifts to an individual over $12,000 in a single year on their tax return.  So as far as anyone knowing, the IRS wants to know and will tax the giftor.

          RJOh's avatar - chipmunk
          mid-Ohio
          United States
          Member #9
          March 24, 2001
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          Posted: December 6, 2006, 6:04 pm - IP Logged

          Say you won a huge jackpot and wanted to help out your closest friends.  Not a 1 time payment, but maybe give them $100,000 a year for life.  Say you were going to do this for 3 friends, so $300,000/yr.

           Is there a way to do this without being hit with HUGE 'gift taxes' from the government?  Could you essentially 'hire' them like an employee and pay them for doing nothing?  What would be the best way to solve this problem?  

           P.S.  I'm not interested in giving them $12,000 or $13,000/year  (whatever the maximum non taxable gift is per year) 

          If they are that close, include them for a share of the winnings when you claim it.  That way they will get their money from the state and pay taxes on it too.  Also they'll will know thay can depend on the check in the mail even if your relationship with them go south later on.

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

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            United States
            Member #34266
            March 1, 2006
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            Posted: December 6, 2006, 6:36 pm - IP Logged

            Wow!  300 thousand dollars a year, can I be your friend?

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              NY
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              Member #23835
              October 16, 2005
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              Posted: December 6, 2006, 9:40 pm - IP Logged

              If they are that close, include them for a share of the winnings when you claim it.  That way they will get their money from the state and pay taxes on it too.  Also they'll will know thay can depend on the check in the mail even if your relationship with them go south later on.


              The IRS won't necessarily believe that somebody else owned  a share of the ticket before the drawing took place. Especially if you  try to split it such that everybody doesn't have  equal shares you may have problems. If somebody wants to give $100,000 to somebody it will probbaly be better to make it a gift and paty the taxes rather than hire tham as an employee. If you pay them $100,000 you'd each pay social security tax, and the recipient would have an additional $100,00 in taxable income. Depending on other income they could lose almost 45% on top of the social security. The gift tax on $80,000 would be a bit under $20,000, so for $100,000 your friend could net about 80 grand.

              You could potentially marry the friend and give them a very nice divorce settlement when you split up a week later. If I won a substantial sum I might marry a couple of my friends, and I might even remarry my current wife afterwards.

              Just one more reaon that anyone who wins the lottery should consult tax and legal professionals.