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tax strategy

Topic closed. 37 replies. Last post 10 years ago by taxguy.

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tnlotto1's avatar - logo
nashville
United States
Member #49896
February 18, 2007
1181 Posts
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Posted: April 5, 2007, 5:28 pm - IP Logged

thanks todd and everybody else for helping to protect us from people who may want to scam us even though i dont have any real money for them to scam out of me right now,ha ha

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    NY
    United States
    Member #23835
    October 16, 2005
    3474 Posts
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    Posted: April 5, 2007, 6:07 pm - IP Logged

    Because the law has changed on gift tax, in 2007, my wife and I can each gift an individual up to $2.0M without triggering the gift tax. This impacts your otherwise good calculations and increases the savings substantially.

    Because a winning lotto ticket in Texas is legally a "bearer bond" until it is signed and presented to the Lottery Commission, I would strongly dispute your characterization of any "fraud" being involved. My sources tell me that the encouragement of the State to consult a tax advisor before you  cash in provides for all manner of partnerships, trusts, etc. to be created and in fact, this happens in almost every instance to help minimize tax consequences.

    While this may or may not actually work( Asking for information to see if anyone has utilized this method is a way to guage its viability), the use of a perfectly legal Net Operating Loss does not mean anyone winds up in a prison cell. At worst it is merely disallowed by the IRS.

    Creating the partnership or trust after the ticket becomes a winning ticket is a separate issue from ownership of the ticket. If you and I already owned the ticket jointly we would be free to create all manner of legal entities to deal with it. Transferring assets we already own to our own trust is completely different than transferring assets to another individual, regardless of whether or not that individual puts the money in their pocket or their trust.

    Based on what you've said so far I'm assuming it goes something like the suggestion of a previous poster. If you could give somebody up to  $4 million without any tax consequences you could structure a split that essentially shared the tax savings of a $4.8 million deduction, potentially  giving each of you close to a million bucks. It's a great idea, except that somebody giving you a winning lottery ticket is giving a gift with huge tax consequences for them. If they simply split the winning ticket with you, the worst that would happen is the IRS would rule it a gift and collect the gift tax. I'm guessing they'd be curious about you giving a gift in return, and that could expose the plan. In that case the best outcome you could hope for is probably that they'd see it as an abusive tax shelter and merly assess some steep penalties resulting in a significant loss. Of course it's also entirely possible that they'd decide it was an attempt at tax fraud, and  you'd face jail time on top of the monetary penalties.

    Of course we're just speculating. Perhaps you have a legitimate idea, or at least one that actually entails minimal risk. If so, feel free to explain it in enough detail that we'll know what your plan actually is. 

      OldSchoolPa's avatar - Lottery-057.jpg
      Gurnee, Illinois
      United States
      Member #49731
      February 12, 2007
      917 Posts
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      Posted: April 5, 2007, 6:27 pm - IP Logged

      I am an accountant who has a  very large net operating loss

      ($4,800,000) that I think could be combined

      with someone's winning, but not yet redeemed lottery ticket to give both parties substantial additional income.

      Has anyone ever used this strategy or does anyone know of a company who is involved with this as a concept, i.e. putting together someone with a large loss carryforward and someone with an as yet redeemed winning lotto ticket? It would generate

      several hundred thousand extra dollars to a Lotto winner.

      This guy must think all lottery winners are new fools.  I would rather just be a winner and let him be a loser...I have no problem paying to Uncle Sam what is due Uncle Sam and I would hope any lottery winner would the same.  That is one of the big reason I wouldn't talk to a tax accountant right away because all they can see is that portion that is going to Uncle Sam...let's see here, let's say I won $10M cash value and paid my 30 percent tax bill; that still leaves me with $7M; why cry over the $3M to the government because you still got the lion share of the prize.  This guy must either be a Jackson Hewitt accountant or a nigerian scammer...either way, get lost loser.

      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!

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        southlake, TX
        United States
        Member #51168
        March 30, 2007
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        Posted: April 5, 2007, 6:44 pm - IP Logged

        As this does not appear to be settled case law, this can only be theory at this time and hence the posting looking for anyone who might be able to give feedback, additional theory or firsthand experience with this concept or some similiar methodology.

        I still maintain that based on the "bearer bond" status as put forth by the Texas Lottery, there is no winning ticket until it is certified by the commission, therefore by definition, there is  NO actual intrinsic value to the ticket until it is received and certified a winning ticket by the Commission.  If you give away the ticket prior to its certification, it has NO value. You can tell someone it is a winning ticket and you have the perfect right to sell it for $1.00 or a $100,000.

         Also because of its bearer bond status under the regulations of the Lottery, there is likewise NO owner of the ticket until it is received by the Commission by the holder. Following what was said above, someone has the legal right to sell, giveaway or even never cash a ticket in.

        Because of this right to sell, no gift tax is due upon the transference of the ticket, although gift tax would come into play if any of the tax savings were given back to the original holder

        Does this make sense. At least as defined in Texas? 

          Winner2Be's avatar - diva
          Charleston
          United States
          Member #1990
          August 5, 2003
          1675 Posts
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          Posted: April 6, 2007, 1:03 pm - IP Logged

           And the difference between tax avoidance and tax evasion is 15 to 20 years.  

          "This looks very interesting to us, Mr. Gotrocks, after you hit the Mega Millions jackpot, only after, did you contact the We Do Voo Doo Accounting firm, on the other side of the country, and "invest" with them.

          Too damn FUNNY!!!

           Prisoner 

          Anyway...have a  Happy Easter !

           Bunny 



          _________________________________________________

          Sometimes the Heart can see what the eyes cannot.

                                                   





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            NY
            United States
            Member #23835
            October 16, 2005
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            Posted: April 6, 2007, 1:47 pm - IP Logged

            As this does not appear to be settled case law, this can only be theory at this time and hence the posting looking for anyone who might be able to give feedback, additional theory or firsthand experience with this concept or some similiar methodology.

            I still maintain that based on the "bearer bond" status as put forth by the Texas Lottery, there is no winning ticket until it is certified by the commission, therefore by definition, there is  NO actual intrinsic value to the ticket until it is received and certified a winning ticket by the Commission.  If you give away the ticket prior to its certification, it has NO value. You can tell someone it is a winning ticket and you have the perfect right to sell it for $1.00 or a $100,000.

             Also because of its bearer bond status under the regulations of the Lottery, there is likewise NO owner of the ticket until it is received by the Commission by the holder. Following what was said above, someone has the legal right to sell, giveaway or even never cash a ticket in.

            Because of this right to sell, no gift tax is due upon the transference of the ticket, although gift tax would come into play if any of the tax savings were given back to the original holder

            Does this make sense. At least as defined in Texas? 

            For somebody claiming to be an accountant you're sounding very  ignorant.  The specific plan you're thinking of might not be settled case law, but the laws about the building blocks were settled along time ago, and it isn't Texas state law or Texas lottery regulations that matter. It's federal law and it's federal prison we're concerned with.

            First, let's forget your nonsensical claim about the ticket being a bearer bond. That means the ownership isn't registered, not that there isn't an owner. I'll be happy to take every cent of cash you have if you think you don't own it.

            Next is the value of the ticket. From the time you buy it until the time thenumbers are drawn it's worth the actual cost of the ticket. The instant the numbers are drawn it  becomes a winning ticket, and is worth whatever the prize is. For those who win in December, state suggestions about taking the time to seek professional advice may mean that a prize that could potentialy have been claimed by 12/31 won't be taxable until the year in which it is actually paid, but the value is established as soon as the drawing determines what the ticket has won. The good news is that if the IRS believes that you honestly believed that you could transfer the ticket without tax consequences after the drawing, they may settle for just the gift taxes that are due.

            Since you haven't offered a different plan than the one outlined in previous posts, I'm sure we understand your basic scheme and have described it correctly. It relies on evading or avoiding the gift tax that comes with giving a share of the lottery winnings to somebody else, and it relies on a transfer of assets that is probably fraudulent.

            Feel free to continue in your quest, but at least be good enough to let your accomplice know that they should seek an independent opinion from a legal advisor who doesn't have a financial stake. Come to think of it, why would somebody with $4.8 million worth of potential deduction seek advice here instead of from a qualified tax attorney?

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              southlake, TX
              United States
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              March 30, 2007
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              Posted: April 9, 2007, 11:34 am - IP Logged

              I have consulted not only with one qualified tax consultant, but with several.

              One of those tax consultants suggested that I seek feedback, not "advice" from anyone in the Industry, other tax people and from anyone who might possiblyhave used or attempted to use a similiar tax strategy.

              The internet and these kinds of forums are particularly useful in contacting the broadest number of people on a particular topic, hence my posting and asking a QUESTION.

              Not to be argumentative, but you do need to brush up on your understanding of the CURRENT Gift/Estate law. It changed a few years ago, providing some substantial one time non taxable transfer opportunities that you either are unfamiliar with or have ignored.

              And you too might be honest enough to let your readers know that the issue of of bearer bond status is nonsensical only in YOUR opinion since you are not a qualified tax expert, attorney, accountant, nor are you really likely to have researched the Texas Lotto Reg's with respect to this issue that you are so quick to put forth an opinion on.

               

              It is a shame that this cannot be used for constructive dialog and as a learning tool instead of it being usurped by those that live to shut down discussion  with sarcasm, snide remarks and constant negativity. 

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                NY
                United States
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                October 16, 2005
                3474 Posts
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                Posted: April 9, 2007, 5:05 pm - IP Logged

                "And you too might be honest enough to let your readers know that the issue of of bearer bond status is nonsensical only in YOUR opinion since you are not a qualified tax expert, attorney, accountant, nor are you really likely to have researched the Texas Lotto Reg's with respect to this issue that you are so quick to put forth an opinion on."

                The part I've emphasized really says it all, but I guess a red herring is the best argument you've got.  The rules and regulations of the Texas lottery have a lot to do with the procedures for claiming a prize and how a ticket is validated, but absolutely nothing to do with the laws on ownership and how bearer bonds work,when a lawful transfer of ownership takes place, or the value of an asset on any given day.

                Regardless of who is in possession, a bearer bond has a lawful owner, as do other possessions, whether the ownership is registered or not. For the purposes of taxes, the value of an asset is the province of the IRS. If Texas chose to  determine value in some other fashion it would be meaningless for our purposes until they enact a state income tax.

                Let's imagine that your client's father bought a bunch of coins at face value when he was a kid. As cash, the coins are bearer bonds. They belong to your client's father, but that ownership isn't registered. Some of those coins have increased substantially in value, and what originally cost $1000 is now worth $112,000. He gives them to your client on January 15, 2007. Was it a gift? What was the value of the gift? Even if you're a really bad tax preparer you probably know that the answers are yes, and $112,000.

                A winning lottery ticket is no different. The ticket has a lawful owner, and if that person gives it to somebody else there is a change in ownership. If the drawing hasn't happened the ticket is worth the face value of $1. If the drawing has taken place the ticket is worth any prize that it wins. The fact that the Texas lottery hasn't yet validated the ticket is meaningless. Either the ticket is a winner or it isn't. If it is a winner it's worth the prize amount. It's not a question of how the Texas lottery works, its how the IRS works.

                As far as gift taxes, that's another red herring. Your scheme relies on the fraudulent transfer of  a share of the prize. The amount of gift taxes, if any, only affects the amount of taxes you're evading.  As far as understanding how they work, I'll simply note that you're the one who seems to be confusing the $2 million estate tax exemption with the $1 million lifetime exemption on gift tax.

                  SirMetro's avatar - center
                  East of Atlanta
                  United States
                  Member #6191
                  August 11, 2004
                  1389 Posts
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                  Posted: April 9, 2007, 6:05 pm - IP Logged

                  "I am an accountant who has a  very large net operating loss ($4,800,000) that I think could be combined with someone's winning, but not yet redeemed lottery ticket to give both parties substantial additional income."

                  Perhaps this would be my first reason to avoid you at all expense. Any, and I do mean ANY Accountant worth their salt would never let anyone other then those who absolutely must be informed, know they have an operating loss.

                  "Has anyone ever used this strategy or does anyone know of a company who is involved with this as a concept, i.e. putting together someone with a large loss carryforward and someone with an as yet redeemed winning lotto ticket?"

                  Again, even if we had, why would any "sane" individual or group consider the services of an Accountant who couldn't keep themself out of the red?

                  "Because the law has changed on gift tax, in 2007, my wife and I can each gift an individual up to $2.0M without triggering the gift tax. This impacts your otherwise good calculations and increases the savings substantially."

                  Maybe you might want to read this little article http://www.irs.gov/compliance/enforcement/article/0,,id=163017,00.html. What may seem to one to be an innocent transfer of funds from one individual to another could in fact be considered tax Fraud. And if you think you can mess with the IRS, you might want to go back and reconsider who put the MOB away. It sure wasn't the Feds.

                  "One of those tax consultants suggested that I seek feedback, not "advice" from anyone in the Industry, other tax people and from anyone who might possiblyhave used or attempted to use a similiar tax strategy."

                  Did it cross your mind at all that perhaps that "Tax Consultant" did NOT want to be associated with what appeared to be a "tax fraud scheme"?

                  "The internet and these kinds of forums are particularly useful in contacting the broadest number of people on a particular topic, hence my posting and asking a QUESTION.

                  And if you ask multiple people what 2 plus 2 is and the response of 3 comes from more then one individual, do you "assume" validity to the answer?

                  "Not to be argumentative, but you do need to brush up on your understanding of the CURRENT Gift/Estate law.

                  Perhaps you should "brush up" upon your understanding of Current Gift/Estate Tax Laws as defined by the IRS because "Gifts to your spouse" have always been non-taxible, reference http://www.irs.gov/businesses/small/article/0,,id=164872,00.html.

                  "It is a shame that this cannot be used for constructive dialog and as a learning tool instead of it being usurped by those that live to shut down discussion with sarcasm, snide remarks and constant negativity.

                  Personally, I delight in posts such as yours. I delight in pointing out the shear ignorance you display in thinking those who post on this site regularly are imbeciles who part easily with their money. I question if you have even bothered to spend any time researching any of the postings on this site. It’s obvious you don’t even understand Current Gift Tax Laws (as it is clearly worded on the IRS.GOV web site). Seriously, what kind of response do you expect when it’s obvious with your own postings how little you know of Federal Tax Law?  On average, you will find most of us are receptive containers eager to scoop up every tidbit of information and knowledge that will get us one step closer to the “big win”. But when we smell anything that even remotely hints at being “illegitimate”, you had better be prepared for the claws and fangs to be bared rather quickly. You want to utilize this site as a learning tool, that is awesome and we welcome you with open arms. But you present a topic that you should have known would be a debatable issue, you had also better be prepared to defend yourself. Because we take no prisoners and in case you haven’t noticed, we don’t tolerate the vultures very well either. One final note, the responses here are my personal opinions. And as with any opinion, I believe they are like noses, everyone has one and most of them smell. 

                  Sir Metro

                    MegaWinner's avatar - Lottery-029.jpg
                    New Jersey
                    United States
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                    March 3, 2007
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                    Posted: April 9, 2007, 10:19 pm - IP Logged

                    What gets me Sir Metro is how taxguy in his first reply claims to be an accountant helping someone else and in another reply claims that it is him that wants to do this.  I smell a rat.

                    Sun Smiley I got my fingers crossed ready to win!!! Sun Smiley

                      Guru101's avatar - rw6jhh
                      Indiana
                      United States
                      Member #48725
                      January 7, 2007
                      1953 Posts
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                      Posted: April 9, 2007, 11:07 pm - IP Logged

                      What gets me Sir Metro is how taxguy in his first reply claims to be an accountant helping someone else and in another reply claims that it is him that wants to do this.  I smell a rat.

                      We all know this guy is up to no good. It's still kinda funny though how losers like this get on a site and expect all the members to just go along with it like it's completely harmless.LOL

                      Gonna win.Big Smile

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                        southlake, TX
                        United States
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                        March 30, 2007
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                        Posted: April 10, 2007, 4:07 pm - IP Logged

                        Guru 101/Master Mason:

                        Why don't you reread my first post. It plainly says "to give both parties substantial additional income." It's not hard; it's in plain English.

                        KY Floyd:

                        Re: Your coin example

                        1. Yes, it is a gift

                        2. The value(or better termed, the basis for gift tax purposes) would be $112,000.

                        3. The gift tax due from the son(beneficiary) is $-0-; the gift tax due from the father(donor) is likewise $-0-

                                *recipients don't pay gift tax

                               *donors tax is computed:

                                          Gift Amount              $112,000

                                          Less: Annual Exclusion  ($12,000)

                                          Subject to gift tax        $100,000

                                          Gift tax rate   @45%       $45,000

                                            Unified tax credit         ($45,000)

                                           Tax due on gift              $ -0-

                         

                               

                        Sir Metro/Mega Whiner:

                        The harm in disclosing that I have the tax benefit of a Net Operating Loss is WHAT???? I thought that honesty and full disclosure is what you self styled protectors of the common good wanted and promoted. Damned if you do; damned if you don't!!

                        .....keep themselves out of the red??? In the interest of fair play and open discussion, why would someone immediately criticize this and immediately characterize it as bad?? If your purpose in being involved in a forum like this is to automatically criticize and label "bad" anything you don't fully understand, why don't you just say that you only want your opinion to be heard and you want to shout down others who might have an original(good or bad) NEW idea??

                        I did read the "little article" you recommended.  It was titled ,      " Examples of Financial Institution Fraud Investitigations." Unfortunately the article, as the title implied, had to do with Financial Institutions and Money Laundering, two subjects that my post had nothing to do with.  If I become a bank or the post has anything to do with Money Laundering instead of a Net Operating Loss, I will certainly refer back to it. 

                        Your comment about  that " Tax Consultant " begs the question about whether your participation in the forum is to promote discussion and dialog or is it merely to see how many negative comments one can make. My statement meant EXACTLY what it said... and the incorrect characterization of the statement underscores to what length you seem to be willing to go to be able to hear yourself.  If you disagree with a comment, it's perfectly permissable to say so, BUT does it all have to be nasty, personal or name calling just because YOU don't agree?

                        Your comment about"asking multiple people  what 2 plus 2 is" is on its face silly, even if it is  meant to be a rhetorical  question. It certainly is not constructive, nor is it likely to promote open discussion in any form. Much more of "it's my way ot he highway" with regard to a different opinion.

                        Once again,  thanks for the reference to the IRS on "Gifts to your spouse", but unfortunately, none of my posts, questions or comments had ANYTHING  to do with making a gift TO my spouse.

                        May I instead make a suggestion that you review the IRS Publication 950 "Introduction to Estate and Gift Taxes" to acquaint yourself on the current Unified Credit (offset to Gift Tax) that is available to individuals in 2007. It gives a very clear explanation of how tax free gifts are made, what the limits are and the effects on the husband /wife/ individual. My comments incorporate these guidelines.

                        Finally, "I may wish  to utilize this site as a learning tool and that is awesome and we welcome you with open arms..." Thus far, I would have to say nothing is further from the truth.

                        A forum is to promote discussion. Everytime you make unwarranted negative comments, mischaracterize what is being said, attack people on a personal basis, make snide remarks, you are not promoting discussion, learning or the basic purpose of a forum. You run off the very people who make forums interesting , informative and yes, even fun.

                         Let the people make up their own mind.  They don't need you to do it for them!!  

                          fwlawrence's avatar - Yavill
                          Austin
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                          Member #9378
                          December 6, 2004
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                          Posted: April 10, 2007, 4:23 pm - IP Logged

                          A lottery ticket is a bearer instrument not a bearer bond.  A bearer bond is just a bond with no reference to the bondholder on the certificate on on the books of the corportion.

                            konane's avatar - wallace
                            Atlanta, GA
                            United States
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                            March 13, 2003
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                            Posted: April 10, 2007, 4:33 pm - IP Logged

                            Remember we've had students log in here doing research as part of a class project.  Perhaps this is one of them.

                            Good luck to everyone!

                              fwlawrence's avatar - Yavill
                              Austin
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                              Member #9378
                              December 6, 2004
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                              Posted: April 10, 2007, 4:52 pm - IP Logged

                              Your profile says you're from Texas, yet your IP address shows you're from Iowa.  What's the deal?

                              BTW, I would warn anybody who may be thinking of contacting this person that this is their first post, and I would recommend against it.  Especially considering the unethical, maybe even illegal, activity proposed by this person.

                              Maybe this is just someone looking to unearth someone willing to do something illegal.  I can't imagine any ethical "tax guy" who would let their client participate in something like this.

                              Is there any way you can just ban people like this from Lottery Post?