Math on SRS winnings

4157 Views 26 Replies 14 Participants Last post by DL, Jun 7, 2007

Discussion Starter · Jun 6, 2007

I was just checking in to the SRS site and was wondering that if you won $30K cash and $25K value in trailer, wouldn't the taxes on that basically wipe out the cash? Don't get me wrong, I'd love to win it. I just thought the tax bracket on winnings is around 50%....

-K

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21 - 27 of 27 Posts

Mike Noel

· #21 · Jun 6, 2007

Bama,

Lighten up bro. I have no problem with them making money, hell, I try to make a ton every day myself. but if my clients were talking this way about me on the internet because something didnt smell right about the way I conducted business it would probably mean I was on my way out of business.

This is why I dont trade bonds on TV

:wink:

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DL

· #22 · Jun 7, 2007

Cory and Dakota said:
As I put in my prior post, it would be extremely agressive to try the LTG route and does not fit the real intent of a LTG. It was a somewhat sarcastic remark that since you put years of work into the dog, then the gain should be treated as a LTG. The IRS would not share this view since you didn't directly invest money and were expecting the gain later.

A gift to an individual is definitely a taxable situation. If you gave your pro the money as a gift, you have to pay his tax on the money as well for over the limit. Now you are paying tax twice on some of the winnings. (The limit has been increased since I took the CPA exam to $12,000 per year. It used to be $10,000)

Here is the Gift Tax blurb from the IRS website.

"IRS Tax Tip 2007-39

If you gave any one person gifts in 2006 that valued at more than $12,000, you must report the total gifts to the Internal Revenue Service and may have to pay tax on the gifts.

The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.

Gifts include money and property, including the use of property without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift."

When someone gives a gift it has to qualify as a gift. I believe words have to be included that say nothing is expected in return. It is kinda far fetched to think that someone would be giving their pro a large sum of money without expecting something in return. Basically, it wouldn't stand up so it is far fetched.

A gift over $12,000 in one year is not necessarily a taxable transaction, and from the way I understand it, a lot of the time it isn't. Say for instance I gave someone $62,000. That is $50,000 over the anual limit to one person. My lifetime annual estate tax exemption would be reduced by $50,000. I would not have to pay any tax on it because that is how it works. There is still plenty of exemption left, and my estate when I die may not be over the exemption amount. The exemption amount is getting as high as $2,000,000 and at one point soon will be limitless until the tax law changes. Lets say the $62,000 was not earned income, but a gift from someone else. It is hypothetical, but in that case I nor the recipient would ever pay taxes on the money.

The taxes they are talking about on the IRS page is estate tax, not income tax.

It is no big deal, it took me a long time to understand it that way and could still be wrong about it but I doubt it. I have rehashed it and second guessed and quized people on it quite a bit.

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Cory and Dakota

· #23 · Jun 7, 2007

DL-

You think if a Pro wins a prestigous event, a gift would be out of the ordinary? I would not think it would be far fetched at all. In fact, I would bet a number of pros that have won nationals for a client have recieved fairly large gifts. I have been given gifts by my clients before (although nothing to trigger a taxable event!) so I would not think a gift from an owner to a pro would would be out of place.

Secondly, gifts over $12,000 are definitely a taxable event. You must file a tax return annually on gifts over $12,000. Whether you owe taxes on that money depends on the situation and what exculsions might apply. A taxable event does not mean that taxes are actually owed. Taxable event means the event must be reported. You are correct that you might not owe taxes until you meet the lifetime threshold.

If you want to read a quick guide that gives some great examples, here is a link: http://www.irs.gov/pub/irs-pdf/p950.pdf

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Ken Guthrie

· #24 · Jun 7, 2007

BamaK9 said:
Paul Yates said:

Mike Noel said:

So in alls minds who do you think wil walk out the WINNER????

Click to expand...

JT and Avery :wink: They win everytime!

Click to expand...

DING DING DING. we have a winner!

Click to expand...

does the business you work for(or own) do it so they can lose money? I didn't think so ... I think the proverbial "horse" is beaten into mush by now guys, I think everybody knows now that you're pissed they make some money in their profession :roll: I don't condone the mistake or any possible alleged tomfoolery by any stretch, but good lord folks I sure as hell ain't working for free and don't expect them to either. I would love it if every season an Avery truck pulled up in my yard and loaded up all last years dekes and gave me new ones for free ... that would work wouldn't it? :roll:

It's funny you go there with Avery.

I have had more phone calls from folks I don't know in the last 2 days than I could imagine.

It has been a real eye opener for me and maybe, just maybe some good will come out of this.

1 phone call in particular shared there may be something big fixin' to happen. We shall see.

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Jeff Huntington

· #25 · Jun 7, 2007

Cory and Dakota said:
DL-

You think if a Pro wins a prestigous event, a gift would be out of the ordinary? I would not think it would be far fetched at all. In fact, I would bet a number of pros that have won nationals for a client have recieved fairly large gifts. I have been given gifts by my clients before (although nothing to trigger a taxable event!) so I would not think a gift from an owner to a pro would would be out of place.

Secondly, gifts over $12,000 are definitely a taxable event. You must file a tax return annually on gifts over $12,000. Whether you owe taxes on that money depends on the situation and what exculsions might apply. A taxable event does not mean that taxes are actually owed. Taxable event means the event must be reported. You are correct that you might not owe taxes until you meet the lifetime threshold.

If you want to read a quick guide that gives some great examples, here is a link: http://www.irs.gov/pub/irs-pdf/p950.pdf

All of this is based on how the owners and trainers account for their business. Most trainers probably active with LLC or other and owners may have an active business or hobby activity.

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DL

· #26 · Jun 7, 2007

bayou beagle said:
Cory and Dakota said:

DL-

You think if a Pro wins a prestigous event, a gift would be out of the ordinary? I would not think it would be far fetched at all. In fact, I would bet a number of pros that have won nationals for a client have recieved fairly large gifts. I have been given gifts by my clients before (although nothing to trigger a taxable event!) so I would not think a gift from an owner to a pro would would be out of place.

Secondly, gifts over $12,000 are definitely a taxable event. You must file a tax return annually on gifts over $12,000. Whether you owe taxes on that money depends on the situation and what exculsions might apply. A taxable event does not mean that taxes are actually owed. Taxable event means the event must be reported. You are correct that you might not owe taxes until you meet the lifetime threshold.

If you want to read a quick guide that gives some great examples, here is a link: http://www.irs.gov/pub/irs-pdf/p950.pdf

Click to expand...

All of this is based on how the owners and trainers account for their business. Most trainers probably active with LLC or other and owners may have an active business or hobby activity.

If an owner has a qualified dog related business, the winnings are income. Any money he gives his pro is an expense to the owner's business. The money the pro would receives would be income to the pro's business.

The post above is talking about gift and estate taxes. Last time I checked businesses don't have estates when they die. It is a different situation, so I totally agree.

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DL

· #27 · Jun 7, 2007

Cory and Dakota said:
DL-

You think if a Pro wins a prestigous event, a gift would be out of the ordinary? I would not think it would be far fetched at all. In fact, I would bet a number of pros that have won nationals for a client have recieved fairly large gifts. I have been given gifts by my clients before (although nothing to trigger a taxable event!) so I would not think a gift from an owner to a pro would would be out of place.

Secondly, gifts over $12,000 are definitely a taxable event. You must file a tax return annually on gifts over $12,000. Whether you owe taxes on that money depends on the situation and what exculsions might apply. A taxable event does not mean that taxes are actually owed. Taxable event means the event must be reported. You are correct that you might not owe taxes until you meet the lifetime threshold.

If you want to read a quick guide that gives some great examples, here is a link: http://www.irs.gov/pub/irs-pdf/p950.pdf

Actually I think whoever receives the prize money is probally spelled out in a previous contract. There is no telling how often someone gives another person a gift and it is surely underreported to a certain degree, but to say someone is going to give another person a gift to save on taxes is half baked in my opinion. I know I keep saying half baked, but I'm trying to keep my tone light. This is just a message board. I hope that I've explained why I thought your post was a little crazy.

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