Bike raffle dilemma

[slowgoing]

I saw that the Davis Phinney Foundation is selling raffle tickets for serial no. 1 of the newest Serotta model. With components, it’s valued at over $10k. So what do you do if you win the bike and incur an additional tax liability on that amount? Sure it would be great to own a new Serotta, but do you want to shell out an additional $2-4+k (maybe more outside the U.S.) for that right? I’m sure many of us would have to sell the bike to raise funds to pay the taxes, with hopefully a little bit left over for our effort. Any tax people out there who could suggest a way to both keep the bike but minimize (avoid) paying taxes on it?

[Lifelover]

No clue if it would work but I know what I would do.

Report it to the IRS as a value of $3000

If by chance you get Questioned by the IRS contact them and discuss it. There must be a process to resolve a situation where a prize giver over values the prize.

Regardless of the truth, it would be pretty easy to convince the average Joe IRS guy that there aint no way in he!! some damn skinny tired bike is worth 10K. He would assume you are being over generous when you agreed to claim 3K.

Such a small amount in the big picture of things they would resolve no problem.

Worst case is you pay the full amount.

Rate that on the dishonest scale. 1 totally ok 10 being dishonest

[cycleman_21]

No clue if it would work but I know what I would do.

Report it to the IRS as a value of $3000

If by chance you get Questioned by the IRS contact them and discuss it. There must be a process to resolve a situation where a prize giver over values the prize.

Regardless of the truth, it would be pretty easy to convince the average Joe IRS guy that there aint no way in he!! some damn skinny tired bike is worth 10K. He would assume you are being over generous when you agreed to claim 3K.

Such a small amount in the big picture of things they would resolve no problem.

Worst case is you pay the full amount.

Rate that on the dishonest scale. 1 totally ok 10 being dishonest



I like the way you think' :D
will you be my accountant next year? :beer:

name withheld by request

[IRS Agent]

Regardless of the truth, it would be pretty easy to convince the average Joe IRS guy that there aint no way in he!! some damn skinny tired bike is worth 10K. He would assume you are being over generous when you agreed to claim 3K.




Oh really. Let me start taking down your personal information and begin the audit process for all of your tax returns starting with 1984. After that we can discuss your decision to give out tax advice.

Elliot Ness

[slowgoing]

OK, let’s keep IRS Agent off our saddles. No more answers couched in terms of “what I would do.” All answers will be understood to be only hypothetical in nature (such as “hypothetically speaking, one might consider doing the following….”) and only friendly suggestions thrown out for further discussion. Moreover, none of this will be understood to be legal advice. There!

The potential problem with claiming a lower value is that the DFP would still be claiming a $10k value, and I would expect the Tax People to want the raffler (sp?) and recipient to claim the same value. Taking Lifelover's suggestion a bit further, maybe, hypothetically speaking, one might consider trying to mutually establish a lower but more realistic value with the raffler before taking possession of the bike.

[Wayne77]

Oh really. Let me start taking down your personal information and begin the audit process for all of your tax returns starting with 1984. After that we can discuss your decision to give out tax advice.

Elliot Ness

You're joking right?

How many forums do you scan each day looking for rogues? Must be a fun job..err..internship. Just curious, how do you intend to initiate the audit process over a forum? Now that you've gone through all the trouble of creating a profile for the Serotta forum to make people afwaid of the scawy I-Ow-Ess Agent, do you intend to stick around? Please do. No party is ever a real party without a good ol' IRS Agent around...

Ooops, my wife is calling me..seems my kids found the matress full of cash that we haven't reported yet...Oh wait, you weren't supposed to know that!! Dohhhhh! :crap:

[Tom]

here's what you do, brought to you by my co-workers that are horse racing aficianados. (Toga reference is for the August Saratoga meet... all the high rollers come into town and bet on the gray, people that follow the sport make more money than on Derby Day...)

It's common practice for a horse player to bet numerous $1 tickets on the same bet to keep the winnings of any one ticket under the IRS minimum. So you get Serotta to sell you an aggregate of 100 $1 tickets for the bike. You get 100 winners... each one wins you a teeny piece of the bike. None go over the IRS limit.

Or you do what I do. Fill out your tax return and put it in the glove compartment of your car and forget it there. When you turn in the car for trade ten or fifteen years later, you find a couple of those envelopes when you clean out the car. I'm not kidding. I did that. For two different years. By mistake, I swear.

If you haven't figured it out by now, I have no good information. Buy your ticket, take your chances. I think if I won that thing I'd be little concerned about the taxes. Frankly, I wouldn't report it and if I started feeling guilty I'd go down to the local high school and do a scholarship in whatever department is nearest to my heart. Which is a lot of fun, by the way. You all should try it some time.

[IRS Agent]

You're joking right?



Of course I am joking. I think Elliot Ness has been dead for 50 years. But I don't think it is a good idea for anyone to discuss cheating the federal government on a public forum. I am not against minimizing taxes, but it should be done behind closed doors where the discussions are protected from the IRS by recognized legal privilleges.

Elliot Ness

[Ti Designs]

There are probably dumber threads than this, I'm avoiding the TdF ones, so it's probably one of those and I don't know about it.

Dude, you're on a forum full of Ottrrot owners, they've already shelled out almost that much for a bike with three digit serial numbers, and they paid tax on that income as well. Given the chance to pay the tax on the income but not pay for the bike itself and I think most people on this board would jump at it. There are two things in life that are certain - death and taxes. Trust me on that one...

[Louis]

I think you have to look at this as a charitable contribution, plain and simple. From a logical perspective anyone who enters is nuts, because the expected value is nowhere near the cost.

Assuming they sell all 1000 tickets and the prize is worth $10,000, then:

EV = $10,000 x ( 1 / 1000 ) = $10

The ticket cost is $100, ten times the expected value, and therefore not even close to a good deal statiscally. Roulette or blackjack at Vegas is a better deal.

Forget about the prize and just think of it as money for a good cause.

Louis

[Wayne77]

Of course I am joking. I think Elliot Ness has been dead for 50 years. But I don't think it is a good idea for anyone to discuss cheating the federal government on a public forum. I am not against minimizing taxes, but it should be done behind closed doors where the discussions are protected from the IRS by recognized legal privilleges.

Elliot Ness

Ok you got me on that one...

Funny, I always thought I was at least somewhat versed in American History but I had to Google Elliot Ness to find out who the guy was..Sad, I know. Maybe that was the day I fell asleep in History class.. :rolleyes:

However, there are probably bigger fish to fry than IRS "workarounds" posted on internet forums.

[Kevin]

There are two things in life that are certain - death and taxes. Trust me on that one...

I think you can escape death if you keeping ride your bike. I have a theory that you don't die until the bike stops moving. Have you ever seen a dead man riding a bike?

Kevin

[Bruce Jacobs]

This is not a quiz show where you can win $20,000 of useless stuff to pay taxes on. This is the opportunity to buy a wonderful bike for far less than list as in your tax braxket percent muptiplied by the bike value. If your bracket is 25% Federal and 8% State your cost of winning the bike is $3400 ($3300 if taxes and $100 for the raffle). Better than a pro deal for sure. :banana:

Bruce

[djg]

Although it may be fun to fantasize about winning the prize, and although a raffle ticket (or two or three) may be a useful prop for that fantasy, you are unlikely to win. Buy tickets to the extent you want to support this worthwhile charity and make investments elsewhere.

For the person who does win: yep, there's a tax burden associated with winnings. There may be some wiggle room in between "suggested retail" and "fair market value," and you can consult an accountant (or tax lawyer, or the IRS) on the particulars, but the burden is what it is.

[93legendti]

Ask Richard Hatch about not paying taxes on winnings!

[xlbs]

as a Canadian. We don't pay taxes on winnings, yet.

A Canadian resident would have to file to have the taxes refunded...There's a growth industry developing here where recovering taxes assessed against Canadians whose winnings are taxed is the focal point of the whole business.

I'd be happy to provide my home address as the recipient. 53 cm. would be fine, thanks...oops, yes, that's my street address...yeah, that's it!!

[Marron]

Back in '96 I was the lucky winner of a Torelli Nitro Express in one of the monthly Bicycling Guide sweepstakes. I ultimately didn't receive the bike until March of '97 because Bill kindly agreed to have Mondonico braze up a custom frame for me. However I did receive the w-4(?) in January. BG's parent, Peterson Publication IIR, reported the value of the prize to the IRS. I think the tax bill was about $800; something my wife pointed out every time I mentioned my "free" bike. Better hope that Bush pushes throught some additional tax relief before the drawing.

[Ken Robb]

I think you can be sure that the full retail value of the bike will be reported on a form 1099 or equivalent showing the name and SS # of the winner. If that doesn't match the amount reported on the winner's tax return it will bring automatic IRS attention just as if your W-2 forms didn't match those filed by your employer.

It has certainly happened that winners on shows like "The Price is Right" end up with very little when the merchandise they win is reported at "MSRP". They have to pay income taxes on that and as was suggested their marginal tax rate could be 35% or more. The usual retail selling price is 60% of MSRP so if they try to sell it through the classifeds, etc. they would be lucky to get 1/2 of the 60% which is obviously less than their tax liability.
Of course if you really WANT that lime green crushed velvet living room suite you still may have a good deal provided that you have the cash to pay the taxes.

[Argos]

Anyone that wins the bike and does not want to pay the taxes......

Give me the bike, I'll pay them with a smile.

Some of you are crazy.