Quick suggestions needed -- do I want to win this prize?

[mikechaudhury]

Ok, here's a hypothetical for everyone -- there is a drawing tonight at the Casino Fandango. There are relatively few entries, as this was a last minute deal, and my chances of winning are fairly good.

The prize is a five-night stay at a Tahoe ski resort, with lift tickets and some meals included. The bad news is that it is during the week, during a specific period -- I believe Feb. 24-29 -- and there is no way I could get off of work to utilize it.

Even if I could sell the package, would I get enough to more than offset my tax liability? Will Fandango put a value on the package and report that to the IRS (via a W-2) and would I have to declare all of that as income? (because of matching programs, it seems that I would have to indeed declare the full value listed on the form, or otherwise likely get a letter from the IRS indicating there is a problem with my return).

If I win the prize, and cannot sell or otherwise dispose of it in a manner I like, can I subsequently decline it? If I cannot repudiate it, that means that I would actually come out behind if I win this prize, since I would have to pay taxes on something I cannot use. Seems like a crazy, but not surprising, result......

So do I bother to show up for the drawing? Has anybody else faced a similar situation?

Thanks all!

[Non-text portions of this message have been removed]

[tralfamidorgooglycra]

The IRS ruling in such matters is that the prize is yours once it is
awarded to you by winning the drawing. If you refuse it, you are
gifting it back to the casino (which may or may not now have to pay
taxes on it, depending on several factors), but you are still liable
for the tax on it since it was given over to your possession, and
whatever brief period of time, you had control and ownership of it.
From the tax law point of view, you entered into a contract by
entering the drawing in the first place--and proceeds from the
performance of a contract are taxable income. The casino performs
its part of the contract (which is between them and all the
participants in the drawing) by drawing a (your) ticket and giving
the winner the prize.

So if you can't possibly use the prize, and you don't think you
could sell it (which I doubt, if it's transferable, given Craigslist
and EBay, but, whatever), then you should not enter the drawing at
all, since you are liable for the taxes the moment you win the prize-
-whether or not you eventually claim it (presuming the casino's
rules for the drawing don't state that the prize is awarded to
someone else immediately if you don't claim it).

[Jean]

<<The IRS ruling in such matters is that the prize is yours once it is
awarded to you by winning the drawing. If you refuse it, you are
gifting it back to the casino (which may or may not now have to pay
taxes on it, depending on several factors), but you are still liable
for the tax on it since it was given over to your possession, and
whatever brief period of time, you had control and ownership of it.>>

I'm not sure it is this cut and dried. If your name is called and you don't "claim" it, I don't think you have "taken possession" of it. And I don't think the casino would give you a 1099 or W-2G in that case. No paperwork would be strong reason not to count it as income. Casinos do not usually make out paperwork until a winner is announced. You could always just not show up!!!!!

I'm sure circumstances will vary - and the tax situation will vary. It is very rare that you can say something "for certain" about taxes and gambling. Marissa and I have always been careful to discuss various options, but warn that in the final decision "your personal circumstances" is the key. In Revenue Procedure 77-29 (on pp 147-150 in "Tax Help for Gamblers") the IRS themselves say and I quote: "...tax liability of each depends on the facts and circumstances of particular situations.

Also, if you win a drawing or win a prize, you do not have to use the paperwork amount as income as that is usually a much-inflated amount. For all such "prizes" - gambling or not - the IRS allows the "fair market value." I discuss that at length in the book since I have had personal experience winning a car with a sticker price on the 1099 but I sold it back to the dealer for a lesser amount, which I used for my tax return. You must add a note of explanation, however.

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