Mixing
If I won the lottery but gave it all away, would I still have to pay taxes?
Clash Royale CLAN TAG#URR8PPP
.everyoneloves__top-leaderboard:empty,.everyoneloves__mid-leaderboard:empty margin-bottom:0;
up vote
1
down vote
favorite
Suppose a hypothetical somebody won the lottery, but being such a magnanimous fellow, they decided to give away every penny. Would my hypothetical do gooder still have to distribute money from Post-tax funds, or is it possible to just tax each recipient instead and distribute the entire lump sum. I'm imagining a scenario where the funds were given in 1000$ increments to as many people as possible(almost 1 million people with a 970k lump sum).
taxes lottery
asked 3 hours ago
user78214
61
New contributor
user78214 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
add a comment |Â
up vote
1
down vote
favorite
Suppose a hypothetical somebody won the lottery, but being such a magnanimous fellow, they decided to give away every penny. Would my hypothetical do gooder still have to distribute money from Post-tax funds, or is it possible to just tax each recipient instead and distribute the entire lump sum. I'm imagining a scenario where the funds were given in 1000$ increments to as many people as possible(almost 1 million people with a 970k lump sum).
taxes lottery
asked 3 hours ago
user78214
61
New contributor
user78214 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
It probably depends on whether the legal doner was you or the lottery commission.
– Lawrence
3 hours ago
2
A jurisdiction tag would make this question more useful, as it is tax-related.
– Grade 'Eh' Bacon
3 hours ago
What country? In the US you would pay income tax, yes. If you gave the money to people (not charities), you'd also pay gift taxes over a certain amount, I think it's like $14k per recipient. (Good luck on the lottery, but I got the winning ticket already! I think.)
– Rocky
2 hours ago
add a comment |Â
up vote
1
down vote
favorite
up vote
1
down vote
favorite
Suppose a hypothetical somebody won the lottery, but being such a magnanimous fellow, they decided to give away every penny. Would my hypothetical do gooder still have to distribute money from Post-tax funds, or is it possible to just tax each recipient instead and distribute the entire lump sum. I'm imagining a scenario where the funds were given in 1000$ increments to as many people as possible(almost 1 million people with a 970k lump sum).
taxes lottery
asked 3 hours ago
user78214
61
New contributor
user78214 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
Suppose a hypothetical somebody won the lottery, but being such a magnanimous fellow, they decided to give away every penny. Would my hypothetical do gooder still have to distribute money from Post-tax funds, or is it possible to just tax each recipient instead and distribute the entire lump sum. I'm imagining a scenario where the funds were given in 1000$ increments to as many people as possible(almost 1 million people with a 970k lump sum).
taxes lottery
taxes lottery
asked 3 hours ago
user78214
61
New contributor
user78214 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 3 hours ago
user78214
61
New contributor
user78214 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 3 hours ago
user78214
61
New contributor
user78214 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 3 hours ago
user78214
61
asked 3 hours ago
user78214
61
61
New contributor
user78214 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
New contributor
user78214 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
user78214 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
It probably depends on whether the legal doner was you or the lottery commission.
– Lawrence
3 hours ago
2
A jurisdiction tag would make this question more useful, as it is tax-related.
– Grade 'Eh' Bacon
3 hours ago
What country? In the US you would pay income tax, yes. If you gave the money to people (not charities), you'd also pay gift taxes over a certain amount, I think it's like $14k per recipient. (Good luck on the lottery, but I got the winning ticket already! I think.)
– Rocky
2 hours ago
add a comment |Â
It probably depends on whether the legal doner was you or the lottery commission.
– Lawrence
3 hours ago
2
A jurisdiction tag would make this question more useful, as it is tax-related.
– Grade 'Eh' Bacon
3 hours ago
What country? In the US you would pay income tax, yes. If you gave the money to people (not charities), you'd also pay gift taxes over a certain amount, I think it's like $14k per recipient. (Good luck on the lottery, but I got the winning ticket already! I think.)
– Rocky
2 hours ago
It probably depends on whether the legal doner was you or the lottery commission.
– Lawrence
3 hours ago
It probably depends on whether the legal doner was you or the lottery commission.
– Lawrence
3 hours ago
2
2
A jurisdiction tag would make this question more useful, as it is tax-related.
– Grade 'Eh' Bacon
3 hours ago
A jurisdiction tag would make this question more useful, as it is tax-related.
– Grade 'Eh' Bacon
3 hours ago
What country? In the US you would pay income tax, yes. If you gave the money to people (not charities), you'd also pay gift taxes over a certain amount, I think it's like $14k per recipient. (Good luck on the lottery, but I got the winning ticket already! I think.)
– Rocky
2 hours ago
What country? In the US you would pay income tax, yes. If you gave the money to people (not charities), you'd also pay gift taxes over a certain amount, I think it's like $14k per recipient. (Good luck on the lottery, but I got the winning ticket already! I think.)
– Rocky
2 hours ago
add a comment |Â
3 Answers
3
active
oldest
votes
up vote
3
down vote
Tax questions typically require a jurisdiction tag, but this is relatively straight forward:
Income taxes are based on exactly that - income. Not 'net income' or profit, just 'income'. ie: if you earn $1M taxable income, you get taxed on $1M.
The exception is where you are allowed 'deductions' from income. Not living expenses or any old expense, but costs that the government deems as being worth a reduction in your tax expense. Common examples are business-related costs if you are self-employed, maybe an interest deduction for mortgage interest on some occasions, and generally, charitable donations.
The question here is - 'is giving $1000 to a bunch of people tax deductible?'. The answer is probably no, for every jurisdiction around the world. Primarily because donations typically need to be made to registered charities to be tax deductible, and also because in most cases, jurisdictions limit the value of such deductions in various ways (in Canada, you get a credit not a deduction for donations, and the tax rate may be different on those two concepts depending on your income; in the US, there is Alternative Minimum Tax which might apply if you wiped out $1M in income from donations in a single year).
Note that in some jurisdictions (such as Canada), lottery winnings are not taxable anyway.
answered 3 hours ago
Grade 'Eh' Bacon
19.1k84968
3
Though it's not applicable to this case, if you've ever filed IRS Schedule C for self-employment income, you'd know that income tax IS based on profit. It's just that ordinary wage earners seldom have expenses to deduct from wages. (Though some work expenses are, or at least used to be, deductible on Schedule A.)
– jamesqf
2 hours ago
@jamesqf Fair enough - and it could be argued that allowable deductions change gross income to taxable income; perhaps that was an imperfect analogy.
– Grade 'Eh' Bacon
2 hours ago
add a comment |Â
up vote
1
down vote
If the lottery pays you $970M, and then you make $1000 gifts to a bunch of people, yes, the initial lottery payment is taxable, but the $1000 gifts are below the gift tax threshold and thus not taxable.
However, many states allow you to choose how winnings are distributed. This is so that if a group of people wins, they can each receive and get taxed on their share, rather than having one person collect the winnings, get taxed, and distribute the winnings, which would be a second taxable event. Theoretically, you could walk into the lottery office with a winning ticket and a list of 970,000 people to whom you want the winnings distributed, and the lottery commission would make a $1000 payment - which would be taxable income - to each of those 'winners'.
In practice, your state lottery commission may balk at dividing up the winnings that broadly.
answered 2 hours ago
Shawaron
3,8681823
Great idea. Could you designate a charitable trust as the beneficiary, and then sort out who the trust gave the money to later? (Would have to be charitable donations, though).
– DJClayworth
1 hour ago
@DJClayworth as a matter of fact, you can, several ways. However this context is gifts to random members of the public, and the charitable trust or other such structure would need to define in its Bylaws who is to benefit and have some sensible, charitable basis for that gift.
– Harper
1 hour ago
...or does it? Suppose I set up a trust whose purpose is to give money to random people, without charitable status. The trust wouldn't be able to claim relief on its income (i.e. the winnings) but it could claim expenses exactly equal to its income (i.e. what was given away) and avoid tax that way. The trust would have overheads, but they would be expenses too. But I digress...
– DJClayworth
52 mins ago
add a comment |Â
up vote
0
down vote
It depends how the money flows.
The money comes to you first, then you dole it out
If the corpus of the lottery winning is first paid to you (some taxes withheld), and then you dollop it out to various persons, you will owe taxes on the full amount. In the US and similar tax mechanisms,
For amounts paid to individuals, you have already paid taxes. You may have to also pay a gift tax when you give the gift.
for amounts you donate to registered nonprofits, you will avoid paying taxes on those amounts. However there is a cap. Take your AGI (substantially the amount of the corpus) and divide by two, that is your cap for most public charities/nonprofits. Some nonprofits are 30% limit of 20% limit, such as your own private foundation. If you exceed the cap, you can "roll over" the amount to the next year, allowing you to take 50% (or whichever fraction) of AGI again, and you can roll it forward up to 3 years, not forever.
The upshot is you'd be clobbered with taxes, good-n-plenty, paying normal taxes on at least 50% of the winning (if you exploited charity deductions to the max).
Or, you direct the lottery commission to pay it to others
In this case, before you receive the prize, you tell the lottery commission to divide the winning up to several persons. (Remember in the USA now, a corporation is a person). They don't mind doing this, happens all the time with "lottery clubs".
In that case, each of those persons will pay their own taxes on their share of the money.
If that person is a non-profit organization, they will not pay any taxes. Congratulations on your name on the stadium.
Taxwise, this is a much, much, much better way to do things.
One of those "persons" can a Private Foundation, such as the Bill & Melinda Gates Foundation, except with your name and you control it. Here's the deal though; you can't just pay yourself a million dollar salary as an employee of the Foundation. The salary must be competitive with what similar ranks of employee are getting, e.g. $75,000/year being a typical Executive Director salary. Setting up a Private Foundation is a complicated pain, and you will definitely need a legal team. You will also learn a new word: Inurement.
A much simpler version of a Private Foundation is a Donor Advised Fund, which you can set up in 20 minutes. It is a storage tank for charitably donated funds, in which you have the rights to direct how the money is invested and re-donated to charity. You can't inure using the DAF, even slightly, because they won't let you.
answered 1 hour ago
Harper
18k32660
add a comment |Â
3 Answers
3
active
oldest
votes
3 Answers
3
active
oldest
votes
active
oldest
votes
active
oldest
votes
up vote
3
down vote
Tax questions typically require a jurisdiction tag, but this is relatively straight forward:
Income taxes are based on exactly that - income. Not 'net income' or profit, just 'income'. ie: if you earn $1M taxable income, you get taxed on $1M.
The exception is where you are allowed 'deductions' from income. Not living expenses or any old expense, but costs that the government deems as being worth a reduction in your tax expense. Common examples are business-related costs if you are self-employed, maybe an interest deduction for mortgage interest on some occasions, and generally, charitable donations.
The question here is - 'is giving $1000 to a bunch of people tax deductible?'. The answer is probably no, for every jurisdiction around the world. Primarily because donations typically need to be made to registered charities to be tax deductible, and also because in most cases, jurisdictions limit the value of such deductions in various ways (in Canada, you get a credit not a deduction for donations, and the tax rate may be different on those two concepts depending on your income; in the US, there is Alternative Minimum Tax which might apply if you wiped out $1M in income from donations in a single year).
Note that in some jurisdictions (such as Canada), lottery winnings are not taxable anyway.
answered 3 hours ago
Grade 'Eh' Bacon
19.1k84968
3
Though it's not applicable to this case, if you've ever filed IRS Schedule C for self-employment income, you'd know that income tax IS based on profit. It's just that ordinary wage earners seldom have expenses to deduct from wages. (Though some work expenses are, or at least used to be, deductible on Schedule A.)
– jamesqf
2 hours ago
@jamesqf Fair enough - and it could be argued that allowable deductions change gross income to taxable income; perhaps that was an imperfect analogy.
– Grade 'Eh' Bacon
2 hours ago
add a comment |Â
up vote
3
down vote
Tax questions typically require a jurisdiction tag, but this is relatively straight forward:
Income taxes are based on exactly that - income. Not 'net income' or profit, just 'income'. ie: if you earn $1M taxable income, you get taxed on $1M.
The exception is where you are allowed 'deductions' from income. Not living expenses or any old expense, but costs that the government deems as being worth a reduction in your tax expense. Common examples are business-related costs if you are self-employed, maybe an interest deduction for mortgage interest on some occasions, and generally, charitable donations.
The question here is - 'is giving $1000 to a bunch of people tax deductible?'. The answer is probably no, for every jurisdiction around the world. Primarily because donations typically need to be made to registered charities to be tax deductible, and also because in most cases, jurisdictions limit the value of such deductions in various ways (in Canada, you get a credit not a deduction for donations, and the tax rate may be different on those two concepts depending on your income; in the US, there is Alternative Minimum Tax which might apply if you wiped out $1M in income from donations in a single year).
Note that in some jurisdictions (such as Canada), lottery winnings are not taxable anyway.
answered 3 hours ago
Grade 'Eh' Bacon
19.1k84968
3
Though it's not applicable to this case, if you've ever filed IRS Schedule C for self-employment income, you'd know that income tax IS based on profit. It's just that ordinary wage earners seldom have expenses to deduct from wages. (Though some work expenses are, or at least used to be, deductible on Schedule A.)
– jamesqf
2 hours ago
@jamesqf Fair enough - and it could be argued that allowable deductions change gross income to taxable income; perhaps that was an imperfect analogy.
– Grade 'Eh' Bacon
2 hours ago
add a comment |Â
up vote
3
down vote
up vote
3
down vote
Tax questions typically require a jurisdiction tag, but this is relatively straight forward:
Income taxes are based on exactly that - income. Not 'net income' or profit, just 'income'. ie: if you earn $1M taxable income, you get taxed on $1M.
The exception is where you are allowed 'deductions' from income. Not living expenses or any old expense, but costs that the government deems as being worth a reduction in your tax expense. Common examples are business-related costs if you are self-employed, maybe an interest deduction for mortgage interest on some occasions, and generally, charitable donations.
The question here is - 'is giving $1000 to a bunch of people tax deductible?'. The answer is probably no, for every jurisdiction around the world. Primarily because donations typically need to be made to registered charities to be tax deductible, and also because in most cases, jurisdictions limit the value of such deductions in various ways (in Canada, you get a credit not a deduction for donations, and the tax rate may be different on those two concepts depending on your income; in the US, there is Alternative Minimum Tax which might apply if you wiped out $1M in income from donations in a single year).
Note that in some jurisdictions (such as Canada), lottery winnings are not taxable anyway.
answered 3 hours ago
Grade 'Eh' Bacon
19.1k84968
Tax questions typically require a jurisdiction tag, but this is relatively straight forward:
Income taxes are based on exactly that - income. Not 'net income' or profit, just 'income'. ie: if you earn $1M taxable income, you get taxed on $1M.
The exception is where you are allowed 'deductions' from income. Not living expenses or any old expense, but costs that the government deems as being worth a reduction in your tax expense. Common examples are business-related costs if you are self-employed, maybe an interest deduction for mortgage interest on some occasions, and generally, charitable donations.
The question here is - 'is giving $1000 to a bunch of people tax deductible?'. The answer is probably no, for every jurisdiction around the world. Primarily because donations typically need to be made to registered charities to be tax deductible, and also because in most cases, jurisdictions limit the value of such deductions in various ways (in Canada, you get a credit not a deduction for donations, and the tax rate may be different on those two concepts depending on your income; in the US, there is Alternative Minimum Tax which might apply if you wiped out $1M in income from donations in a single year).
Note that in some jurisdictions (such as Canada), lottery winnings are not taxable anyway.
answered 3 hours ago
Grade 'Eh' Bacon
19.1k84968
answered 3 hours ago
Grade 'Eh' Bacon
19.1k84968
answered 3 hours ago
Grade 'Eh' Bacon
19.1k84968
answered 3 hours ago
Grade 'Eh' Bacon
19.1k84968
19.1k84968
3
Though it's not applicable to this case, if you've ever filed IRS Schedule C for self-employment income, you'd know that income tax IS based on profit. It's just that ordinary wage earners seldom have expenses to deduct from wages. (Though some work expenses are, or at least used to be, deductible on Schedule A.)
– jamesqf
2 hours ago
@jamesqf Fair enough - and it could be argued that allowable deductions change gross income to taxable income; perhaps that was an imperfect analogy.
– Grade 'Eh' Bacon
2 hours ago
add a comment |Â
3
Though it's not applicable to this case, if you've ever filed IRS Schedule C for self-employment income, you'd know that income tax IS based on profit. It's just that ordinary wage earners seldom have expenses to deduct from wages. (Though some work expenses are, or at least used to be, deductible on Schedule A.)
– jamesqf
2 hours ago
@jamesqf Fair enough - and it could be argued that allowable deductions change gross income to taxable income; perhaps that was an imperfect analogy.
– Grade 'Eh' Bacon
2 hours ago
3
3
Though it's not applicable to this case, if you've ever filed IRS Schedule C for self-employment income, you'd know that income tax IS based on profit. It's just that ordinary wage earners seldom have expenses to deduct from wages. (Though some work expenses are, or at least used to be, deductible on Schedule A.)
– jamesqf
2 hours ago
Though it's not applicable to this case, if you've ever filed IRS Schedule C for self-employment income, you'd know that income tax IS based on profit. It's just that ordinary wage earners seldom have expenses to deduct from wages. (Though some work expenses are, or at least used to be, deductible on Schedule A.)
– jamesqf
2 hours ago
@jamesqf Fair enough - and it could be argued that allowable deductions change gross income to taxable income; perhaps that was an imperfect analogy.
– Grade 'Eh' Bacon
2 hours ago
@jamesqf Fair enough - and it could be argued that allowable deductions change gross income to taxable income; perhaps that was an imperfect analogy.
– Grade 'Eh' Bacon
2 hours ago
add a comment |Â
up vote
1
down vote
If the lottery pays you $970M, and then you make $1000 gifts to a bunch of people, yes, the initial lottery payment is taxable, but the $1000 gifts are below the gift tax threshold and thus not taxable.
However, many states allow you to choose how winnings are distributed. This is so that if a group of people wins, they can each receive and get taxed on their share, rather than having one person collect the winnings, get taxed, and distribute the winnings, which would be a second taxable event. Theoretically, you could walk into the lottery office with a winning ticket and a list of 970,000 people to whom you want the winnings distributed, and the lottery commission would make a $1000 payment - which would be taxable income - to each of those 'winners'.
In practice, your state lottery commission may balk at dividing up the winnings that broadly.
answered 2 hours ago
Shawaron
3,8681823
Great idea. Could you designate a charitable trust as the beneficiary, and then sort out who the trust gave the money to later? (Would have to be charitable donations, though).
– DJClayworth
1 hour ago
@DJClayworth as a matter of fact, you can, several ways. However this context is gifts to random members of the public, and the charitable trust or other such structure would need to define in its Bylaws who is to benefit and have some sensible, charitable basis for that gift.
– Harper
1 hour ago
...or does it? Suppose I set up a trust whose purpose is to give money to random people, without charitable status. The trust wouldn't be able to claim relief on its income (i.e. the winnings) but it could claim expenses exactly equal to its income (i.e. what was given away) and avoid tax that way. The trust would have overheads, but they would be expenses too. But I digress...
– DJClayworth
52 mins ago
add a comment |Â
up vote
1
down vote
If the lottery pays you $970M, and then you make $1000 gifts to a bunch of people, yes, the initial lottery payment is taxable, but the $1000 gifts are below the gift tax threshold and thus not taxable.
However, many states allow you to choose how winnings are distributed. This is so that if a group of people wins, they can each receive and get taxed on their share, rather than having one person collect the winnings, get taxed, and distribute the winnings, which would be a second taxable event. Theoretically, you could walk into the lottery office with a winning ticket and a list of 970,000 people to whom you want the winnings distributed, and the lottery commission would make a $1000 payment - which would be taxable income - to each of those 'winners'.
In practice, your state lottery commission may balk at dividing up the winnings that broadly.
answered 2 hours ago
Shawaron
3,8681823
Great idea. Could you designate a charitable trust as the beneficiary, and then sort out who the trust gave the money to later? (Would have to be charitable donations, though).
– DJClayworth
1 hour ago
@DJClayworth as a matter of fact, you can, several ways. However this context is gifts to random members of the public, and the charitable trust or other such structure would need to define in its Bylaws who is to benefit and have some sensible, charitable basis for that gift.
– Harper
1 hour ago
...or does it? Suppose I set up a trust whose purpose is to give money to random people, without charitable status. The trust wouldn't be able to claim relief on its income (i.e. the winnings) but it could claim expenses exactly equal to its income (i.e. what was given away) and avoid tax that way. The trust would have overheads, but they would be expenses too. But I digress...
– DJClayworth
52 mins ago
add a comment |Â
up vote
1
down vote
up vote
1
down vote
If the lottery pays you $970M, and then you make $1000 gifts to a bunch of people, yes, the initial lottery payment is taxable, but the $1000 gifts are below the gift tax threshold and thus not taxable.
However, many states allow you to choose how winnings are distributed. This is so that if a group of people wins, they can each receive and get taxed on their share, rather than having one person collect the winnings, get taxed, and distribute the winnings, which would be a second taxable event. Theoretically, you could walk into the lottery office with a winning ticket and a list of 970,000 people to whom you want the winnings distributed, and the lottery commission would make a $1000 payment - which would be taxable income - to each of those 'winners'.
In practice, your state lottery commission may balk at dividing up the winnings that broadly.
answered 2 hours ago
Shawaron
3,8681823
If the lottery pays you $970M, and then you make $1000 gifts to a bunch of people, yes, the initial lottery payment is taxable, but the $1000 gifts are below the gift tax threshold and thus not taxable.
However, many states allow you to choose how winnings are distributed. This is so that if a group of people wins, they can each receive and get taxed on their share, rather than having one person collect the winnings, get taxed, and distribute the winnings, which would be a second taxable event. Theoretically, you could walk into the lottery office with a winning ticket and a list of 970,000 people to whom you want the winnings distributed, and the lottery commission would make a $1000 payment - which would be taxable income - to each of those 'winners'.
In practice, your state lottery commission may balk at dividing up the winnings that broadly.
answered 2 hours ago
Shawaron
3,8681823
answered 2 hours ago
Shawaron
3,8681823
answered 2 hours ago
Shawaron
3,8681823
answered 2 hours ago
Shawaron
3,8681823
3,8681823
Great idea. Could you designate a charitable trust as the beneficiary, and then sort out who the trust gave the money to later? (Would have to be charitable donations, though).
– DJClayworth
1 hour ago
@DJClayworth as a matter of fact, you can, several ways. However this context is gifts to random members of the public, and the charitable trust or other such structure would need to define in its Bylaws who is to benefit and have some sensible, charitable basis for that gift.
– Harper
1 hour ago
...or does it? Suppose I set up a trust whose purpose is to give money to random people, without charitable status. The trust wouldn't be able to claim relief on its income (i.e. the winnings) but it could claim expenses exactly equal to its income (i.e. what was given away) and avoid tax that way. The trust would have overheads, but they would be expenses too. But I digress...
– DJClayworth
52 mins ago
add a comment |Â
Great idea. Could you designate a charitable trust as the beneficiary, and then sort out who the trust gave the money to later? (Would have to be charitable donations, though).
– DJClayworth
1 hour ago
@DJClayworth as a matter of fact, you can, several ways. However this context is gifts to random members of the public, and the charitable trust or other such structure would need to define in its Bylaws who is to benefit and have some sensible, charitable basis for that gift.
– Harper
1 hour ago
...or does it? Suppose I set up a trust whose purpose is to give money to random people, without charitable status. The trust wouldn't be able to claim relief on its income (i.e. the winnings) but it could claim expenses exactly equal to its income (i.e. what was given away) and avoid tax that way. The trust would have overheads, but they would be expenses too. But I digress...
– DJClayworth
52 mins ago
Great idea. Could you designate a charitable trust as the beneficiary, and then sort out who the trust gave the money to later? (Would have to be charitable donations, though).
– DJClayworth
1 hour ago
Great idea. Could you designate a charitable trust as the beneficiary, and then sort out who the trust gave the money to later? (Would have to be charitable donations, though).
– DJClayworth
1 hour ago
@DJClayworth as a matter of fact, you can, several ways. However this context is gifts to random members of the public, and the charitable trust or other such structure would need to define in its Bylaws who is to benefit and have some sensible, charitable basis for that gift.
– Harper
1 hour ago
@DJClayworth as a matter of fact, you can, several ways. However this context is gifts to random members of the public, and the charitable trust or other such structure would need to define in its Bylaws who is to benefit and have some sensible, charitable basis for that gift.
– Harper
1 hour ago
...or does it? Suppose I set up a trust whose purpose is to give money to random people, without charitable status. The trust wouldn't be able to claim relief on its income (i.e. the winnings) but it could claim expenses exactly equal to its income (i.e. what was given away) and avoid tax that way. The trust would have overheads, but they would be expenses too. But I digress...
– DJClayworth
52 mins ago
...or does it? Suppose I set up a trust whose purpose is to give money to random people, without charitable status. The trust wouldn't be able to claim relief on its income (i.e. the winnings) but it could claim expenses exactly equal to its income (i.e. what was given away) and avoid tax that way. The trust would have overheads, but they would be expenses too. But I digress...
– DJClayworth
52 mins ago
add a comment |Â
up vote
0
down vote
It depends how the money flows.
The money comes to you first, then you dole it out
If the corpus of the lottery winning is first paid to you (some taxes withheld), and then you dollop it out to various persons, you will owe taxes on the full amount. In the US and similar tax mechanisms,
For amounts paid to individuals, you have already paid taxes. You may have to also pay a gift tax when you give the gift.
for amounts you donate to registered nonprofits, you will avoid paying taxes on those amounts. However there is a cap. Take your AGI (substantially the amount of the corpus) and divide by two, that is your cap for most public charities/nonprofits. Some nonprofits are 30% limit of 20% limit, such as your own private foundation. If you exceed the cap, you can "roll over" the amount to the next year, allowing you to take 50% (or whichever fraction) of AGI again, and you can roll it forward up to 3 years, not forever.
The upshot is you'd be clobbered with taxes, good-n-plenty, paying normal taxes on at least 50% of the winning (if you exploited charity deductions to the max).
Or, you direct the lottery commission to pay it to others
In this case, before you receive the prize, you tell the lottery commission to divide the winning up to several persons. (Remember in the USA now, a corporation is a person). They don't mind doing this, happens all the time with "lottery clubs".
In that case, each of those persons will pay their own taxes on their share of the money.
If that person is a non-profit organization, they will not pay any taxes. Congratulations on your name on the stadium.
Taxwise, this is a much, much, much better way to do things.
One of those "persons" can a Private Foundation, such as the Bill & Melinda Gates Foundation, except with your name and you control it. Here's the deal though; you can't just pay yourself a million dollar salary as an employee of the Foundation. The salary must be competitive with what similar ranks of employee are getting, e.g. $75,000/year being a typical Executive Director salary. Setting up a Private Foundation is a complicated pain, and you will definitely need a legal team. You will also learn a new word: Inurement.
A much simpler version of a Private Foundation is a Donor Advised Fund, which you can set up in 20 minutes. It is a storage tank for charitably donated funds, in which you have the rights to direct how the money is invested and re-donated to charity. You can't inure using the DAF, even slightly, because they won't let you.
answered 1 hour ago
Harper
18k32660
add a comment |Â
up vote
0
down vote
It depends how the money flows.
The money comes to you first, then you dole it out
If the corpus of the lottery winning is first paid to you (some taxes withheld), and then you dollop it out to various persons, you will owe taxes on the full amount. In the US and similar tax mechanisms,
For amounts paid to individuals, you have already paid taxes. You may have to also pay a gift tax when you give the gift.
for amounts you donate to registered nonprofits, you will avoid paying taxes on those amounts. However there is a cap. Take your AGI (substantially the amount of the corpus) and divide by two, that is your cap for most public charities/nonprofits. Some nonprofits are 30% limit of 20% limit, such as your own private foundation. If you exceed the cap, you can "roll over" the amount to the next year, allowing you to take 50% (or whichever fraction) of AGI again, and you can roll it forward up to 3 years, not forever.
The upshot is you'd be clobbered with taxes, good-n-plenty, paying normal taxes on at least 50% of the winning (if you exploited charity deductions to the max).
Or, you direct the lottery commission to pay it to others
In this case, before you receive the prize, you tell the lottery commission to divide the winning up to several persons. (Remember in the USA now, a corporation is a person). They don't mind doing this, happens all the time with "lottery clubs".
In that case, each of those persons will pay their own taxes on their share of the money.
If that person is a non-profit organization, they will not pay any taxes. Congratulations on your name on the stadium.
Taxwise, this is a much, much, much better way to do things.
One of those "persons" can a Private Foundation, such as the Bill & Melinda Gates Foundation, except with your name and you control it. Here's the deal though; you can't just pay yourself a million dollar salary as an employee of the Foundation. The salary must be competitive with what similar ranks of employee are getting, e.g. $75,000/year being a typical Executive Director salary. Setting up a Private Foundation is a complicated pain, and you will definitely need a legal team. You will also learn a new word: Inurement.
A much simpler version of a Private Foundation is a Donor Advised Fund, which you can set up in 20 minutes. It is a storage tank for charitably donated funds, in which you have the rights to direct how the money is invested and re-donated to charity. You can't inure using the DAF, even slightly, because they won't let you.
answered 1 hour ago
Harper
18k32660
add a comment |Â
up vote
0
down vote
up vote
0
down vote
It depends how the money flows.
The money comes to you first, then you dole it out
If the corpus of the lottery winning is first paid to you (some taxes withheld), and then you dollop it out to various persons, you will owe taxes on the full amount. In the US and similar tax mechanisms,
For amounts paid to individuals, you have already paid taxes. You may have to also pay a gift tax when you give the gift.
for amounts you donate to registered nonprofits, you will avoid paying taxes on those amounts. However there is a cap. Take your AGI (substantially the amount of the corpus) and divide by two, that is your cap for most public charities/nonprofits. Some nonprofits are 30% limit of 20% limit, such as your own private foundation. If you exceed the cap, you can "roll over" the amount to the next year, allowing you to take 50% (or whichever fraction) of AGI again, and you can roll it forward up to 3 years, not forever.
The upshot is you'd be clobbered with taxes, good-n-plenty, paying normal taxes on at least 50% of the winning (if you exploited charity deductions to the max).
Or, you direct the lottery commission to pay it to others
In this case, before you receive the prize, you tell the lottery commission to divide the winning up to several persons. (Remember in the USA now, a corporation is a person). They don't mind doing this, happens all the time with "lottery clubs".
In that case, each of those persons will pay their own taxes on their share of the money.
If that person is a non-profit organization, they will not pay any taxes. Congratulations on your name on the stadium.
Taxwise, this is a much, much, much better way to do things.
One of those "persons" can a Private Foundation, such as the Bill & Melinda Gates Foundation, except with your name and you control it. Here's the deal though; you can't just pay yourself a million dollar salary as an employee of the Foundation. The salary must be competitive with what similar ranks of employee are getting, e.g. $75,000/year being a typical Executive Director salary. Setting up a Private Foundation is a complicated pain, and you will definitely need a legal team. You will also learn a new word: Inurement.
A much simpler version of a Private Foundation is a Donor Advised Fund, which you can set up in 20 minutes. It is a storage tank for charitably donated funds, in which you have the rights to direct how the money is invested and re-donated to charity. You can't inure using the DAF, even slightly, because they won't let you.
answered 1 hour ago
Harper
18k32660
It depends how the money flows.
The money comes to you first, then you dole it out
If the corpus of the lottery winning is first paid to you (some taxes withheld), and then you dollop it out to various persons, you will owe taxes on the full amount. In the US and similar tax mechanisms,
For amounts paid to individuals, you have already paid taxes. You may have to also pay a gift tax when you give the gift.
for amounts you donate to registered nonprofits, you will avoid paying taxes on those amounts. However there is a cap. Take your AGI (substantially the amount of the corpus) and divide by two, that is your cap for most public charities/nonprofits. Some nonprofits are 30% limit of 20% limit, such as your own private foundation. If you exceed the cap, you can "roll over" the amount to the next year, allowing you to take 50% (or whichever fraction) of AGI again, and you can roll it forward up to 3 years, not forever.
The upshot is you'd be clobbered with taxes, good-n-plenty, paying normal taxes on at least 50% of the winning (if you exploited charity deductions to the max).
Or, you direct the lottery commission to pay it to others
In this case, before you receive the prize, you tell the lottery commission to divide the winning up to several persons. (Remember in the USA now, a corporation is a person). They don't mind doing this, happens all the time with "lottery clubs".
In that case, each of those persons will pay their own taxes on their share of the money.
If that person is a non-profit organization, they will not pay any taxes. Congratulations on your name on the stadium.
Taxwise, this is a much, much, much better way to do things.
One of those "persons" can a Private Foundation, such as the Bill & Melinda Gates Foundation, except with your name and you control it. Here's the deal though; you can't just pay yourself a million dollar salary as an employee of the Foundation. The salary must be competitive with what similar ranks of employee are getting, e.g. $75,000/year being a typical Executive Director salary. Setting up a Private Foundation is a complicated pain, and you will definitely need a legal team. You will also learn a new word: Inurement.
A much simpler version of a Private Foundation is a Donor Advised Fund, which you can set up in 20 minutes. It is a storage tank for charitably donated funds, in which you have the rights to direct how the money is invested and re-donated to charity. You can't inure using the DAF, even slightly, because they won't let you.
answered 1 hour ago
Harper
18k32660
edited 1 hour ago
answered 1 hour ago
Harper
18k32660
answered 1 hour ago
Harper
18k32660
answered 1 hour ago
Harper
18k32660
18k32660
add a comment |Â
add a comment |Â
user78214 is a new contributor. Be nice, and check out our Code of Conduct.
user78214 is a new contributor. Be nice, and check out our Code of Conduct.
user78214 is a new contributor. Be nice, and check out our Code of Conduct.
user78214 is a new contributor. Be nice, and check out our Code of Conduct.
Sign up or log in
StackExchange.ready(function ()
StackExchange.helpers.onClickDraftSave('#login-link');
);
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Post as a guest
StackExchange.ready(
function ()
StackExchange.openid.initPostLogin('.new-post-login', 'https%3a%2f%2fmoney.stackexchange.com%2fquestions%2f101273%2fif-i-won-the-lottery-but-gave-it-all-away-would-i-still-have-to-pay-taxes%23new-answer', 'question_page');
);
Post as a guest
Sign up or log in
StackExchange.ready(function ()
StackExchange.helpers.onClickDraftSave('#login-link');
);
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Post as a guest
Sign up or log in
StackExchange.ready(function ()
StackExchange.helpers.onClickDraftSave('#login-link');
);
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Post as a guest
Sign up or log in
StackExchange.ready(function ()
StackExchange.helpers.onClickDraftSave('#login-link');
);
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
It probably depends on whether the legal doner was you or the lottery commission.
– Lawrence
3 hours ago
2
A jurisdiction tag would make this question more useful, as it is tax-related.
– Grade 'Eh' Bacon
3 hours ago
What country? In the US you would pay income tax, yes. If you gave the money to people (not charities), you'd also pay gift taxes over a certain amount, I think it's like $14k per recipient. (Good luck on the lottery, but I got the winning ticket already! I think.)
– Rocky
2 hours ago