So you want to win a car ( tax update)

J

johnsnook

Active member
Sweepstakes Plus Subscriber
Well, as some of you know, I won a JEEP WRANGLER last year, ARV $35,000, well I traded that for a lesser JEEP and some cash. Now it's tax time and I find out that, even though I traded for a lesser car and cash, I still have to pay the tax on the original ARV, because the IRS does not care what you do with your prize, or who you sell it to, even if you take a loss, they want the whole shebang. Well, I got a new car and enough cash to pay the taxes (state and fed) plus $3000 left in cash. Disappointing, but at least I got a car and some cash. So, if you are trying to win a car, or house, or anything big, please think about the tax that you will have to pay, and make sure that you can pay it, either out of pocket or by sale of the prize with some profit for you. And, also get some proof of the real ARV of the prize by looking on the net and recording it in case the sponsor hits you with a high 1099 value.
 
Golden advice! Thanks for taking the time to share your experience!
 
I won a watch that had an ARV of like $1500. The day I was notified I'd won, I searched for them, and they were selling for less than $500!!!


amyshulk said:
Information courtesy of this link ~ How to Dispute an ARV on Your Sweepstakes Taxes

When you win a sweepstakes prize, you are only required by the IRS to report the fair market value (FMV), not the sponsor's approximate retail value (ARV); but how do you go about finding out what the FMV is and how do you handle the difference on your taxes? Find out here.

How to Dispute an ARV on Your Sweepstakes Taxes
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So basically, if you win a biggie {other than cash} do your due diligence to find and document the FMV ASAP - it will save you from the greedy IRS!!!
 
FMV is definitely the right way to report it, just make sure you do it right. I always figured if I won a car I'd probably keep it and sell my existing one to pay the taxes.
 
I'd love to win a car and have to deal with those problems.

I'd probably take my lumps with the taxes, sell it to the dealer and run to my Bank with the cash.

Yup!
 
curmudgeon said:
I'd love to win a car and have to deal with those problems.

I'd probably take my lumps with the taxes, sell it to the dealer and run to my Bank with the cash.

Yup!
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Not me!!! Hassle free is my motto, so if it says "cash in lieu" I'll go for it, but in this economy, no way am I haggling with a dealer to buy it back for *much* less than the FMV, not to mention the HUGE gap between that and the ARV!!!

Then again, I detest dissension, and the last time I was at a car dealership {8 years I think?}, my witchy side came out, after being jerked around all dang day!!!
 
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I like the math.

Lets say you win a car with an arv of $20,000 an you're in the 20% tax bracket. Your tax liability is then $4,000.

You should be able to get a dealer to offer you at least $15,000 for it so you're $11,000 ahead. Even if the best offer you can get is for $10,000 (one half of the ARV) you still $6,000 ahead after taxes.

The exception for me would be if I won my "dream" car, which I’d keep.

Here's a link to two of 'em. The first is a So African reproduction of a classic '60's Austin Healey. It uses modern mechanicals, the 6 cyl engine and drive from a BMW 325i. You can get it serviced at any BMW Dealer.

Cooper Healey

The second is produced in Florida and is also a fiber glass reproduction of a '60's Austin Healey. This one uses General Motors parts and is available with air conditioning which the original Austin Healey wasn’t. If you can afford the ins., you could order it with the optional ZZ 383 435 HP engine. That’d make it Cobra in disguise. The Cobra doesn’t have a top or side windows whereas the Healey comes with a soft top and side curtains (removable widows). Electric windows are available as an option. The Healey is a true all weather car while the Cobra isn’t.

Healey Replicas by Cavaliere Roadsters Development LLC
 
Several years ago I won an off road thingy (sorry I'm a girl:) ) I tried to sell it and got no where, so I took the offer from the dealer to buy it back at a loss. Yes, I too paid taxes on the actual retail price, not the cash I got in hand. Still, I can't complain, it was way more cash than I had to begin with. Those things are expensive! Except for trips, it's the biggest win I've had. Paying taxes on trips is more painful since you don't usually win cash, or something to sell, just an awesome time.
 
curmugeon, you would think that your formula is right, however, it depends on your income. I am on SS and dont have that much, but I also won a prize for 3300, so that all totaled for my income. And let me tell you that the dealer is not the one to fix the price, however, you can bargain with the dealer, but, the arv is still determined by the sponsor. I had to pay tax on the full value of the 1099, eventhough I sold the car and took a lesser car with cash that did not amount to the full ARRV of the prize
 
And not only, do you have to bargain with the dealer for the sell of the vehicle you won, then you have to bargain for the vehicle that you want, then you have to bargain for the cash you want back. BUYING a new car X 3= total frustration
 
johnsnook - I merged the 3 threads you had on this into 1 thread JIC anyone doesn't know the backstory and would like to read it:

http://www.sweepsadvantage.com/forum/general-sweepstakes-talk/51609-so-you-want-win-car.html

johnsnook said:
Well it's not all you think it is. I WON a new car lately, worth aprx. 35,000, although I have not received it yet, after some research, I find that I will will owe approx. 1/3 of the value of the car in tax. Unless you have something to trade, or sell to pay the tax, ie; state sales tax, and title fees, dealer fees, and income tax. You should decline the prize. But, you could sell the car and pay the tax and maybe make a little money. Which is what I may have to do.
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johnsnook said:
curmugeon, you would think that your formula is right, however, it depends on your income. I am on SS and dont have that much, but I also won a prize for 3300, so that all totaled for my income. And let me tell you that the dealer is not the one to fix the price, however, you can bargain with the dealer, but, the arv is still determined by the sponsor. I had to pay tax on the full value of the 1099, eventhough I sold the car and took a lesser car with cash that did not amount to the full ARRV of the prize
Click to expand...

Ah, I remember reading sweeps wins are considered "windfalls" and they can mess you up but good if you are on gov't. assistance - same for SSI? That's bogus - you paid into that, it's an entitlement, NOT welfare!!!

You just reminded me of why I avoid car sweeps - if they mod it, or if it's a collectible {'65 Mustang or something} then yeah, the ARV = FMV, and you are stuck!!!
 
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