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lump sum confusion

Topic closed. 4 replies. Last post 5 years ago by maximumfun.

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New Member
NY
United States
Member #127621
May 5, 2012
19 Posts
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Posted: May 10, 2012, 9:52 pm - IP Logged

I am confused by these statements:

"A lump-sum winning will typically get reduced by 45% or more for the time value of money (acceleration by 2o+ years)"

ok, so say jackpot is $100, lump sum is 60% of it, so it's $60m, correct? Fine so far.

"and then the net amount is further reduced by approximately 35% or more for taxes � leaving a net amount of 35% or less of the gross winnings."

ok, so the taxes are taken off the $60m not the jp amount of $100m, right? Leaving $40m in the bank. thus, you take home %40 of jackpot prize.

"Installment collections will only generally only be subjected to the federal tax hit (depending on state rules) and the taxes are paid over the collection period. "

huh? So if I choose 26 installments then do I get the entire jackpot of $100m or not? Do I still pay %35 tax on the entire $100m, or the yearly installments?

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    San Diego, CA
    United States
    Member #58386
    February 12, 2008
    287 Posts
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    Posted: May 10, 2012, 10:33 pm - IP Logged

    I am confused by these statements:

    "A lump-sum winning will typically get reduced by 45% or more for the time value of money (acceleration by 2o+ years)"

    55%, $55 million.

    "and then the net amount is further reduced by approximately 35% or more for taxes � leaving a net amount of 35% or less of the gross winnings."

    $55 million x .35 =19.25     $35.75 left

    "Installment collections will only generally only be subjected to the federal tax hit (depending on state rules) and the taxes are paid over the collection period. "

    You get the full amount over the 26 years.  Each installment is taxed.

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      Kentucky
      United States
      Member #32652
      February 14, 2006
      7322 Posts
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      Posted: May 11, 2012, 12:04 am - IP Logged

      I am confused by these statements:

      "A lump-sum winning will typically get reduced by 45% or more for the time value of money (acceleration by 2o+ years)"

      ok, so say jackpot is $100, lump sum is 60% of it, so it's $60m, correct? Fine so far.

      "and then the net amount is further reduced by approximately 35% or more for taxes � leaving a net amount of 35% or less of the gross winnings."

      ok, so the taxes are taken off the $60m not the jp amount of $100m, right? Leaving $40m in the bank. thus, you take home %40 of jackpot prize.

      "Installment collections will only generally only be subjected to the federal tax hit (depending on state rules) and the taxes are paid over the collection period. "

      huh? So if I choose 26 installments then do I get the entire jackpot of $100m or not? Do I still pay %35 tax on the entire $100m, or the yearly installments?

      "A lump sum" is the cash value of the advertised annuity jackpot. The current estimated cash value of PB is $50.4 million and the estimated annuity is $80 million. If the winner decides to take the annuity, they will get 30 annual payments of about $2,166,667. 25% is deducted for Federal taxes and an average of 6% for state taxes so the net payment will be $1.84 million annually.  Depending on deductions, the winner might owe another 9% in Federal taxes.

      If the winner takes the cash, they should net about $30.24 million or 37.8% of the advertised annuity jackpot. If they take the annuity, without lots of deductions, they will probably pay about 40% in state in Federal taxes every year but only on the yearly payment.

      A reportable financial adviser could substantially reduce the yearly Federal taxes of an annuity payment, but much more difficult for the one time cash value payment.

        psykomo's avatar - animal shark.jpg

        United States
        Member #4877
        May 30, 2004
        5124 Posts
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        Posted: May 11, 2012, 12:55 am - IP Logged

        Bed>>>>>>>lump sum>>>>>>>>>>>>don't B confused>>>>>>>>if U haete OAMO>>say>SO!!!!!!!!!!

        >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> if U haata TOTAMOTO>say>SO!!!!!!

        Bed>>>>>>>lumo sum>>>>>>>>>>>>wake UP>>>>>>>>>>>>> if U heatee peopleTO>say>SO!!!!!!

        BedJack-in-the-BoxBed

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

          United States
          Member #124616
          March 16, 2012
          2642 Posts
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          Posted: May 11, 2012, 11:56 am - IP Logged

          Bed>>>>>>>lump sum>>>>>>>>>>>>don't B confused>>>>>>>>if U haete OAMO>>say>SO!!!!!!!!!!

          >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> if U haata TOTAMOTO>say>SO!!!!!!

          Bed>>>>>>>lumo sum>>>>>>>>>>>>wake UP>>>>>>>>>>>>> if U heatee peopleTO>say>SO!!!!!!

          BedJack-in-the-BoxBed

          LOL!