Raffle winnings

The result is the same, but not exactly. You'd recognize the market value of the gift certificate, which might be less. Then if you exchange it for goods of a higher value, there would be a capital gain (probably short term) in the amount of the difference.

Well eBay is the largest auction in the world. Just about anyone in the world can access it and bid. It seems to me that would be an excellent recommendation for market value.

Stu

If you sell it on eBay, and someone is foolish enough to bid (and pay) $3,000, why wouldn't you have $2,980 of taxable income (less eBay fees)?

Seth

And you think I would not mind paying taxes on excess income?

Dick

Think about that again! A charity holds a rafffle for up to a $20,000 discount on the car of your choice at a dealer. You win and buy a car with an MSRP plus tax of $16,500. Are you really suggesting you pay taxes on the $20,000.

Better point is the Sesame Street skit where Cookie Monster wins the jackpot on a game show and has to choose between a multimillion dollar prize and a COOKIE. As he whoofs down the cookie, are you really going to hand him a multimillion dollar tax bill? You ruthless, b@$!@&#

The raffle is a week from Saturday and I am taking the position that the FMV is what the sponsor paid for the certificate. If it sells for more on eBay, the FMV goes up. If the high bid is less, it's still what the sponsor paid for it. If I use it (which I will not do), it's the $2,700.

Why did I buy the ticket if I had no intention of accepting the merchandise? Because I am a member of the group from which I derive mucho qualitiative benfits and I chose to support its raffle.

Dick

Well, if you could have had a car or discount worth $20,000 (assuming someone would have paid that much to buy it from you), perhaps. It looks a lot like income you could have had but voluntarily waived - what's that called again?

In his case it would be a multimillion dollar cookie for which (since it's related to his work) he should be entitled to a deduction for in total when he eats it.

Actually that's an interesting question. I'd guess we couldn't come up with any case authority for this issue.

That's reasonable. For the amount of money involved, and since the tax would probably work out the same for various approaches, I doubt the IRS would have a problem with that.

You could contribute it back to the organization and get a deduction to offset the income.

Stu

(snipped....)

And this now reminds me of long ago when using a certain credit card gave me dollar points towards purchase of a new Ford auto. At the time of purchase, I had a "credit" of some 4,300$, give or take. And that certainly wasn't taxable income.

So if this raffle awards such a "discount", I can't see taxable income.

ChEAr$, Harlan

That's an interesting perspective - especially coming from you. I see your point. But I think the difference is that your discount was not transferrable, i.e., use it or lose it. That's consistent with frequent flyer miles.

Dick

First off, I agree with Stuart that the value is determined at the time of the award or at the time of constructive receipt not at some later date. Secondly, I stand by my original assessment that a gift certificate valued at $2700 credit at a retail establishment is the FMV at the time of receipt. Whether or not you sell it, auction it off, gift it or otherwise dispose of it or let it sit in your dresser drawer is not pertinent. The only way to avoid $2700 of income is to disclaim the prize.

The credit card points were a rebate on the amount spent, well under

100% of that amount. (So when you paid a $50 restaurant tab, it was really $49.00 for food and $1.00 for points.) Had the rebate exceeded the total spent, the excess would have been taxable.

It is transferrable, if you're smarter than the bank (and the fine print matches what my brother used some years ago for precisely that sort of situation).

Seth

So if I send you a discount certificate with face amount $500 for Seth's Overpriced Books, it's worth $500 even though I'm charging $525 for a book Amazon charges $30 for?

Seth

Shouldn't there be two transactions -- first, other income of 2700, second is capital gain of 2980-2700? The tax is the same either way though.

No, because it fails the FMV test.

The issue is the amount of tax due, not how much (or whether) you object to it.

In that case, though, I could see $2680 as the taxable income for winning the certificate, and $300 (less fees) as short-term capital gain.

Seth

Yes; I thought of that later. The tax might not be the same (e.g. if the taxpayer is carrying forward a large capital loss).

Seth

On Jun 2, 12:20 pm, snipped-for-privacy@panix.com (Seth) wrote:>

You are mistaken. There is no current income for "winning" the privilege of purchasing something at it's current fair market value.

So why wouldn't the original gift certificate also, albeit to a much lesser degree?

Seth

In this case, he would have won a $2700-face certificate for a $20 raffle ticket, a gain of $2680.

Then he sold the certificate on eBay for $3,000; assume $100 in fees to eBay, that's a profit of $200 (his basis being FMV on which he was taxed).

The eBay _buyer_ has no tax consequences.

Seth

Because the original buyer purchased a raffle ticket on a chance to win $2700 of merchandise at a retail establishment. The prices offered by the merchant were the FMV that a willing buyer would pay for the merchandise. Therefore, at the time of winning, the buyer had a certificate valued at $2700. Any subsequent sale would not be relevant IMHO.

My mistake. I was distracted by the phony discount scenario in a sub- thread.

That we know about.