Question

Dan loves game shows, He has been a guest on many game shows including Ellen. On the last game show, The Price Is Right, he was invited to participate. As a result, he won a new car valued at $48,000. He questions whether this prize is taxable or is it a non-taxable gift. He is concerned about the value of the car and the associated tax that he may have to pay. Dan emailed you, his tax accountant. He wants you to tell him if he is required to report the car as income, and if he is required to report it as income, how much would be reported?

Please answer this question fully & correctly and I will give you a 5 star review.

Answer 1

Ans:

Yes definately prize is taxable, he should pay the tax accordingly.

Winning a new car is a dream for many sweepstakes fans. Owning a brand-new set of wheels without having to pay the manufacturer's suggested retail price is a great deal. Dan should make some plans for what to do once he've actually won a car. The dream can turn into a nightmare if he aren't prepared for the consequences..

In the United States, winners are required to pay taxes on sweepstakes prizes, which are treated as income for tax purposes. That means he'll be required to add the fair market value of prize to earnings from jobs and other sources when you report your income to the IRS.

The amount he'll have to pay once won a car , but he can make a rough estimate that he'll be paying around 1/3 of the prize's value. So if wining a vehicle worth $48,000, he can expect to pay around $16,000 in taxes.

A $48,000 car for $16,000 is a great deal, but it can be a challenge to find an extra ten grand in your budget.