Win a sheep hunt, get a huge tax bill?

[npaden]

According to the IRS, a raffle is gambling. You are being taxed on your gambling winnings.

Finding an item on sale at a store is completely different.

 

[BrentD]

Like I said, I'd need a lawyer.

Buying a raffle ticket is more like buying a movie ticket. You do it for the entertainment. And if the raffle is a "donated" hunt where no money exchanges hand, then who's to say it is a $45k wager.

Yeah, would need a lawyer. I might win though. In this crazy world, I just might.

Don't hold your breath...

 

[VikingsGuy]

An interesting connundrum. Why would it be any different that going to the store and finding a $180 Stetson on sale for $1.80? Is a raffle really any different? I would expect to pay 5% sales tax on the price of the ticket maybe, but not on the price of the hunt since the winner is not paying that price. And it wouldn't be income any more than the saving on the $1.80 Stetson was income.

I'm sure I would need to pay a lawyer however... Might cost more in the long run.

Yes, very different. Buying on sale is not a gain (remind our spouses of this ) it is just that, a purchase at the then market rate. But if you walked in a they gave you a $180 Stetson for being their 1,000,000th shopper, that would be a gain. Typically folks ignore those small items come tax time. But if they gave you a prize that was worth $10,000 or more they would have to report to the IRS. So, under $10,000 is a bit of an honor system, more than $10,000 is reported and there computers may flag your return.

 

[VikingsGuy]

Like I said, I'd need a lawyer.

Buying a raffle ticket is more like buying a movie ticket. You do it for the entertainment. And if the raffle is a "donated" hunt where no money exchanges hand, then who's to say it is a $45k wager.

Yeah, would need a lawyer. I might win though. In this crazy world, I just might.

Don't hold your breath...

Winning a raffle is a “taxable winning” by IRS rules, regardless of various common sense analogies.

 

[J Deck]

You can deduct your gambling losses to offset your winnings. How would they prove you didn't lose $25k in Vegas?

 

[VikingsGuy]

You can deduct your gambling losses to offset your winnings. How would they prove you didn't lose $25k in Vegas?

Across the board, the way it works is that IRS has to prove you have income, then you have to prove you have deductions - you get no benefit of the doubt. The standards for writing down "vegas" loses is quite demanding.

 

[kimbersig]

i asked a buddy that's won 2 hunts at WSF. he didn't have to pay income tax since the hunts had no cash value since you were not allowed to resell the hunt. I don't know all the tax laws so don't want to argue with anyone but i'm sure the Wild Sheep Foundation isn't doing illegal stuff. but if you're worried about it by all means don't buy a ticket....makes my odds better.

 

[ShootsManyBullets]

Ask the CPA in charge of this place...

 

[Big Fin]

This has been settled for years. Link here - https://www.irs.gov/taxtopics/tc419 And in IRS Publication 505.

Gambling winnings are fully taxable and you must report the income on your tax return. Gambling income includes but isn't limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips.

Note, it doesn't say taxable only if over a certain dollar amount. If you win, say, a hunt, you are supposed to be issued a Form W2-G if your winnings are more $600 in FMV and the value of you item is 300X the wagered amount. Even if you don't get the Form W2-G, the winnings are taxable. The Form is merely for compliance and possible withholding by the group sponsoring the raffle.

 

[Flatrock]

Randy, what would you make of kimbersig's buddy? Maybe he never got a W2-G and didn't even know he was supposed to pay taxes on it? From your post, it looks very cut and dried that you are supposed to pay taxes on it.

 

[SaskHunter]

Laughs in Canadian citizen

 

[npaden]

Randy, what would you make of kimbersig's buddy? Maybe he never got a W2-G and didn't even know he was supposed to pay taxes on it? From your post, it looks very cut and dried that you are supposed to pay taxes on it.

I'm not Randy, but the rules are pretty clear. Lots of people don't file their taxes correctly. Hopefully they are past the statue of limitations for it and they don't have any issues.

The way several of these organizations structure their raffles they take advantage of the 300 times the wagered amount. If the raffle tickets are $100 and the value of the prize is $29,990 then they don't have to issue a W-2G and report it to the IRS. To a lot of folks if there isn't a paper trail then they aren't going to report it on their taxes. Same with folks that give big discounts for things when you pay cash. It would be pretty hard for the IRS to catch. I doubt they are going to assign an agent to tracking down all the winners of raffle prizes to make sure they reported it on their tax returns.

The tricky part is when these prizes start climbing over the $30,000 value mark or the raffle tickets only cost $25. Again, that's why a lot of the folks doing the raffles give you some kind of discount if you buy more than one ticket. If you get 3 tickets for $250, then the amount wagered is $250 x 300 = the prize could be $75,000 before they have to report it.

Also I would bet there are plenty of smaller non profit organizations doing raffles that don't know the rules either and probably aren't reporting things that they should.

Just because the organization doing the raffle doesn't report it to the IRS doesn't mean that the winner should be reporting the winnings on their tax return.

 

[rmyoung1]

Don’t get me wrong, I want to hunt sheep (really badly, in fact), but you know something has gone off the rails when the average hunter can’t even afford to WIN a sheep hunt. Ouch!