Haaa ha ha ha hah!
linkylink
Ha ha ha <cough> hee hee, heh.
Um, duh?
Don’t want to cough up the taxes? Sell the car. You’ve still made, what, 21 grand? Anybody complains about it should give the damn thing back.
Yeah, yeah, I just enjoyed the irony of a gift costing $7000 out of the recipient’s own pocket to recieve. Of course, as noted in the article, they could take the car, sell it (probably for much less than the retail value of $29,000) and use that to pay the tax.
Then they could spend the remainder to buy a used Kia.
“Here’s a $28,000 car, for $7,000.”
“The nerve!”
I’d hire a lawyer. Unless there was something on the ticket that said I was entering the audience with the expectation of winning a prize, then Oprah’s gift is just that…a gift. All taxes are her responsibility.
Weren’t the people who received the gift in dire straits in the first place? So basically, the only fiscally viable options for them would be to sell it or not receive it. Some gift, huh?
Sure, they can sell it and make money off of it…heck, I’d advertise it as one of those cars and jack the price up!
…and yeah, with a little over 20k, I could buy a car that wasn’t so fugly.
In other words, it’s not a gift, it’s a deal. Granted, a deal where the recipient pays the government, rather than the offerer.
And silenus, I’m pretty sure that the Oprah show can’t cover the taxes, too. If they did, the extra money would be part of the gift, so the amount that needed to be paid in taxes would be even higher.
If they were in dire straits, they would hardly be in a 25% income tax bracket.
And how is this different from any other car prize giveaway? When you win a car on a game show, you have to pay taxes on that, too. How is this any different?
As I understand it, they didn’t enter anything but a building. Oprah just gave them all cars. Therefore, there was no understanding that they might receive anything, so it is a gift, not a prize. That means that Harpo Productions pays the taxes, not the recipients.
I am wrong.
Your kung fu is mightier than mine.
Judging by the IRS definition of “prize”, those cars were gifts, not prizes.
IANATL (Tax Lawyer) but isn’t there a limit on the monetary amount of ‘gifts’ you could receive from an individual in a year before it counts as income? It was to prevent dodging estate taxes by giving the goods or money to your heirs before you pass on. Last I heard it was $3,000.
DD
Silenus, a person or organization giving someone a gift is under no obligation to pay the taxes on that gift. The full legal liability for the taxes are the receiver’s not the giver’s.
But by definition, a gift is not considered taxable income.
Walloon, while the audience may not have expected to “win” anything that day, those cars were clearly prizes in the way that Harpo Enterprises undoubtedly set up the release forms, etc. for people to keep them. If it’s not Oprah’s intent to offer the cars free and gratis, then it’s not a gift.
Gifts are between individuals. In this case, two corporations (Harpo and Pontiac) worked to essentially offer brand new cars free to audience members minus even local taxes and fees. If you accepted the cars, you accept the attendant financial responsibilities.
Alternately you could just sell your car and pocket the difference after taxes. That’s probably what I would have done.
According to the link that I posted above, taxes on gifts are paid by the donor, not the recipient, unless special arrangements are made.
Just a thought:
Pretend there was, oh, a single parent in the audience. Down on their luck, on welfare, trying to make it, etc. Or maybe somebody on disability.
Then they win a car. They can’t afford 7 grand in taxes, so they sell it.
There goes their medical card, help with daycare and whatever else they’re getting. Subsidized housing? They’re either going to get kicked out or their rent is going to go up significantly.
Suddenly their income is considered to be 21 grand a year, but I imagine 21k doesn’t go very far in the Chicago area. It’s enough for them to get cut off from the help they were getting, though.
I can easily see how someone’s life could be ruined by something like this. I have a friend on disability; if she were to win that much money she’d be screwed.
Yes, I know. Nobody HAS to accept a car. This is more of a lament about how some people probably couldn’t accept one because of situations like this …
As was mentioned above, someone with such a low income wouldn’t be in a tax bracket that required them to pay $7000. The headline in the OP article link says “up to $7000 tax” (emphasis mine), and they do mention that tax bracket makes a difference as to how much must be paid. The $7000 figure appears to be the maximum tax anyone would have to pay on the car, not what everyone must pay.
I don’t know what the minimum tax would be, but for a single parent (filing as a head of household) on welfare I’m sure it would be a lot less that seven grand.
And of course they have the option of declining the car.
If Oprah (the woman, not the show) coughed up the (let’s assume) $7,000 for all 267 audience members, that would come to $1,869,000. Doesn’t she have that in pocket change? Heck, that would be $1.8 million less that she would have to pay taxes on, too.
Or the recipients could just “forget” to include the income on their returns. 
But, I suppose they would be getting a 1099 for that, wouldn’t they? Oh well.