Watching game shows in the 70’s I had heard that “a lot” of winners never got their prizes because they could not afford the taxes, espcially on a big prize like a car. Did/do game shows make the person pay taxes? And if you won a car did you have to pay registration fees, etc. or is/was all that covered? Would someone really be expected to pay fees to get the chessy Wheel of Fortune cermaic lawn frog or the 150.00 20 pound Toblerone bar? Could you take the car, sell it, and then pay the fees?
I think I’ve heard a number of stories about how people will win cars on Price is Right and not be able to afford the taxes. They do indeed collect taxes if the winnings are over $600.
Any winnings are taxable and that includes prizes. If you win the pet goat on Let’s Make a Deal, you are supposed to pay taxes on it – it’s considered income.
If the prize is worth over a certain value, then the IRS requires you pay the taxes up front. There are cases where people did not have the money to pay the taxes, but often in that case the show would give you the money it would cost to buy the prize as a cash payment. The taxes would be deducted, but you could do what you want with the rest of the cash.
I know a guy that won a Porsche on Wheel of Fortune, but he had to sell the car to pay the taxes on it. So he didn’t get to keep the prize, but only because he didn’t have the ready cash to pay the tax bill.
But on these shows don’t you usually win both cash and prizes?
It wasn’t a prize on a gameshow but I remember when Oprah gave cars to her entire studio audience that a lot of the people receiving them balked because they couldn’t afford the taxes on them.
A friend of mine won the raffle at the Pittsburgh Blues Festival a few years ago. He didn’t want the SUV, and worked out a deal with the dealership to take a car of lesser value and use the difference to pay taxes/licensing/etc.
A lot of those shows where you win A BRAND NEW CAR (or cash equivalent) expect you to take the cash instead. The car and the dinette set are just props. Not that they won’t be able to give you the car if you want the car, just it’s easier to deal with cash. And it’s easy to pay taxes on the cash prize.
I have also heard how contests which offer odd prizes like a log cabin style home will actually build the home if you insist, but expect anyone who wins to take the cash equivalent.
There was an episode of the Andy Griffith show where Aunt Bee wins a bunch of Kitchen Appliances and a Fur coat. She ends up having to sell everything but the fur coat to pay the taxes on the winnings. She also sells the fur coat in the end to but something else.
This show might be part of the root of the UL. The episode would be from the late sixties.
Jim
I’m now thinking of Stampy, Bart Simpson’s elephant.
I think the advertiser would give you the money, not the show.
Depends on the show and the prize. IIRC, small prizes are usually furnished by the advertisers, but big prizes are usually purchased by the show.
The thing I wonder about is the fact that most game shows have a disclaimer in the credits that reads to the effect of “Contestants must meet eligibility requirements to recieve prizes.” If a contestant didn’t meet the eligibility requirements, would they still be able to play the game?
Right. But yes, if you take the car, you have to pay taxes on it. And some dudes can not afford the taxes. However, you’d find that out later, come April 15th, likely. With cash, there might well be witholding but they can’t withold on a car.
That being said- on a car there are sales & transfer taxes and tags, and you will likely have to pay them before getting the car. On a Porsche, that could be pricey.
We buy coins and jewelry from the public.
A few years ago, a lovely young lady came in looking to sell a diamond tennis bracelet. We offered her $500, if I remember correctly. It was a bracelet we could purchase new from a wholesaler for $800, IF we really wanted to stock that bracelet. We would probably retail it at $1200. But you never know when and if these things sell.
She had won it in a radio station contest. The bracelet was supplied by a local jeweler. He valued it at $3000. So, the poor girl had her prize reported to the IRS as $3000. But, she was a big-time honcho who made BIG income. She was in the 30%(or greater) tax bracket. She owed taxes of over $900 for the bracelet. But she could only sell it for $500. And we were probably the best offer she was gonna get, unless she found a private buyer, which ain’t easy.
At least with a car, you can get a pretty good percentage of the retail price if you have to sell it.
Think about that the next time you win a prize that has a “retail” value of xxx. You just might be a loser.
I remember that one. I think she especially liked the garbage disposal. However, the results were basically accurate if I am hearing correctly. Fur coats were very coveted and expensive in those days so there would have been plenty of taxes owed.
A related question I’ve always wondered about.
I win a car, and I have to pay the taxes on it. Suppose the people who run the contest also offer to pay the tax. But then, doesn’t this tax money count as income for me, so that I have to pay tax on it as well? So say they pay that tax as well. But what amount would they be paying a tax on? Apparently the original tax plus the new tax, since that’s the amount they’re giving me. So now they are giving me the original tax amount, plus more than twice the tax on that amount itself. This reiterates, and clearly the sum diverges.
So it appears they can not offer to pay the tax for me without being committed to paying an infinite amount of money. But that can’t be right: surely there’s a way for them to pay the tax for me. (Right?)
So how would it work?
-FrL-
*Or, apparently, on some methods for computing sums of divergent series, they would only have to pay me something like -1/2 dollars. 
To give a concrete example:
Say the car is worth 20,000, and say the tax is ten percent. So they offer to pay me 2,000 dollars.
But now they’re giving me a car plus $2000, meaning a prize package worth a total of $22,000. This is taxed. So if they want to pay my tax for me, they must pay 2,200 dollars.
Now the prize package is worth $24,200! After paying the tax on this, the package goes up to $26,620! And so on.
I have a feeling my mis-step is in the part where I say that they would pay 22,000 plus 2,200 if they want to offer to pay my tax for me, as it appears the car is taxed twice at that calculation. But I’m not sure. Because here’s another way to think about it, which tries to avoid the double taxation problem, and arrives at a different but no less troubling result.
Again, say the car is worth twenty thousand. So they offer the car plus two thousand to cover the tax. But since they are now offering an extra 2000 dollars, they need to pay the tax on that–200 more dollars. But since they are offering an extra 200 dollars, they need to pay the tax on that–20 more dollars. And so on. So they end up having to give me a package worth 22,222.22222 or, rounded, just 22,222.22. But that means they’ve paid 2,222.22 in taxes on a 20,000 dollar car–that’s more than ten percent.
Furthermore, since they are in fact giving me a package worth 22,222.22, it stands to reason that I will be taxed on this, and if they want to pay the tax for me, they have to cough up another 2,222.22, and now the package totals 24,444.44, and the divergent loop described above bites us once more.
So, the question is: If somone gives someone something, and also wants to pay their tax for them on the thing they gave them, how is the amount of tax worked out?
-FrL-
Regarding samclem’s anecdote about the prize winner with the diamond tennis bracelet, I’m not a tax attorney, but it seems wrong to me that she should have to pay taxes on the $3,000 value declared by the radio station, when the fair market value of it is only $500 (based on samclem’s offer and presumably confirmed by offers from other dealers). Or if she’s stuck with the inflated valuation, she ought just donate it to charity and take a $3,000 tax deduction, which would wipe out the $900 liability.