Selling Winning Lotto Ticket to Financial Institution

[jharvey963]

Ummmm, am I making a dumb mistake here? If you have a winning ticket for $100 million, and you try to sell it to a company, they won’t pay you $95 million, because that company would get taxed on the $100 million value. So to the company, that $100 million ticket will be worth much less (let’s say $60 million just for argument’s sake).

So let’s say they’ll pay you $55 million for the ticket. Doesn’t that $55 million represent taxable income for you? So you’ll end up with about $33 million after taxes. So you’ve now handily reduced your after tax value from $60 million to $33 million.

Seems like you’ve now created 2 taxable transactions, not 1. So unless 1 of those transactions can be made non-taxable, there’s no way this could be a reasonable thing to do. Shoot me down if I’m wrong.

J.

[Really_Not_All_That_Bright]

No, you’re absolutely right.

[Darth_Panda]

The Company that bought it would be able to write off what they pay you as an expense. Normally this would mean that they only pay taxes on the profit (revenue-cost), but since the ticket may be taxed at a different rate than the revenues that they could apply the costs against (corporate tax rates), you might end up with some overall cash flow impacts there (I’m not super familiar with lotto taxes). The point is that they would pay taxes, but the amount would be considerably less than the tax burden on the entire winnings (probably on the order of 2 to 5 million, depending on how much the rates vary).

[joebuck20]

@DataX

I live in a state, Maryland, which you can remain anonymous. I agree there are good reasons for wanting the data to be public, but I certainly would not want my info known. I don’t think they would force the photo thing on you (unless they have a policy of doing it with everyone). There are plenty of people (other einners) who like publicity.

If I had to (didn’t live in MD) I’d try to negotiate the sale to someone else (there are companies that specialize in structured settlements - which this can be like). Or I’d change my name to John Smith, (you have (I think) 180 days to claim the prize), and then simply change it back. It would be reported in the papers - that “John Smith” of some city other than mine (rent an apartment for six months) won the prize. If I had to appear to collect the check - id hire the same type of makeup artist who does stuff for 60 minutes where they interview a confidential informant.

The lottery of course has to comply with whatever the law is, but most of that stuff is written so they don’t get sued for using you as an example in advertising.

In this vein, I wonder what the Lottery folks would say if you insisted you had severe burns on your face, and showed up with your head completely bandaged.

[JSexton]

Also, you only get the full value if you take payments over 20 years, which the purchasing company may not be willing to do if they have to pay you the full value up front.

That’s going to further reduce your total haul.

[amarinth]

@jharvey963

Ummmm, am I making a dumb mistake here? If you have a winning ticket for $100 million, and you try to sell it to a company, they won’t pay you $95 million, because that company would get taxed on the $100 million value. So to the company, that $100 million ticket will be worth much less (let’s say $60 million just for argument’s sake).

So let’s say they’ll pay you $55 million for the ticket. Doesn’t that $55 million represent taxable income for you? So you’ll end up with about $33 million after taxes. So you’ve now handily reduced your after tax value from $60 million to $33 million.

Seems like you’ve now created 2 taxable transactions, not 1. So unless 1 of those transactions can be made non-taxable, there’s no way this could be a reasonable thing to do. Shoot me down if I’m wrong.

J.

You’re not wrong about the taxes, but it is not necessarily unreasonable to value your privacy and $30-or-so million higher than being publicly known as the Powerball winner and $60-or-so million.

[Terr]

@amarinth

You’re not wrong about the taxes, but it is not necessarily unreasonable to value your privacy and $30-or-so million higher than being publicly known as the Powerball winner and $60-or-so million.

He is wrong about the taxes. The company will write off the money it pays him, and pay taxes only on the “profit”.

[rogerbox]

@Rachellelogram

Can you cite this? Not that I doubt the possibility, but I’ve never heard this before.

In China you have to appear in person to be photographed. But you’re allowed to wear a costume and full face masks, which plenty of people do, which leads to hilarity:

NameBright - Coming Soon

[Duckster]

(O)nly six states – Kansas, Maryland, Delaware, Michigan, North Dakota and Ohio – allow lottery winners to remain anonymous.

– snip –

The other 37 states that run lotteries, along with the District of Columbia, differ in just how much publicity they require of winners. Some, like Illinois, insist on dragging winners before a camera, while others simply publish the winners’ names and let media hounds follow the trail. In some places, including Colorado, Connecticut and Vermont, winners can evade the spotlight by forming a trust or a limited liability company to claim the money on their behalf. However, at least one state, Oregon, explicitly forbids this practice.

http://articles.businessinsider.com/2012-05-01/news/31513356_1_lottery-winners-mega-millions-illinois-lottery

[Fear_Itself]

I plan to set up a super PAC that will claim the money, tax free.

[voltaire]

@rogerbox

In China you have to appear in person to be photographed. But you’re allowed to wear a costume and full face masks, which plenty of people do, which leads to hilarity:

NameBright - Coming Soon

I’m simultaneously amused and suspicious that there’s some funny business going on there.

Looking at that leads me to the conclusion that it would be much better to not require a public appearance at all, than to require one and allow disguises.

[cmosdes]

@Duckster

http://articles.businessinsider.com/2012-05-01/news/31513356_1_lottery-winners-mega-millions-illinois-lottery

For multi-state lotteries like PowerBall, can you claim the prize in a different state than the one you purchased the ticket?

[rogerbox]

@voltaire

I’m simultaneously amused and suspicious that there’s some funny business going on there.

Looking at that leads me to the conclusion that it would be much better to not require a public appearance at all, than to require one and allow disguises.

Considering they execute people who tamper with the lottery system in China, I think it’s fairly legit. I don’t think it’s unusual for laws to unintentionally cause hilarity, even here in the USA.