TANSTAAFL

[Long Run]

This is why Jeopardy is the best game.

We all dream of winning big on a TV game show. But the reality is more “show” than “game.” Here's how it really goes down.

Winning your favorite game show ain't all it's cracked up to be.

Jeopardy, Wheel of Fortune—heck, even Family Feud—all feel like tickets to prosperity when you're watching from home. And the winnings are real. It's just that those winnings come with some pretty hefty strings attached.

We're not saying you should feel sorry for the lady who just won a Caribbean vacation with the spin of a wheel and some lucky guesswork. But before you quit school to travel the game show circuit, there are a few things you should know about the nitty gritty details behind the pageantry.

Here's more from a woman who has been there, done that, and paid the taxes.

Aurora De Lucia, a TV editor and blogger in New York City, appeared on The Price Is Right in 2013.

* * *

De Lucia was pretty successful during her The Price Is Right appearance. * * * The result was that De Lucia won a bit of cash ($96, to be exact), a pair of fancy 3D camcorders, and—the big prize—a brand new Chevy Cruze LS sedan.

The Downside of Game-Show Winnings, in a Word

It all boils down to one thing: taxes.

* * *
So, when you win a game show, you get taxed on the cash value of your prizes as if they were income. But you don't have an option to take cash instead of the prize itself. If you want to liquidate a refrigerator you don't need or a jet ski you'll never use, you have to do it the old-fashioned way: by selling it.

And before you can even take ownership, you have to agree to pay the taxes. In De Lucia's case, that turned out to be a serious burden.

Doing the Math

The total cash value of her prizes was $21,008, as De Lucia writes on her blog.

With federal, state, and sales taxes all stacked on top of each other, that tax bill came to nearly $9,000.

She had to pay the $2,067 sales tax out of her pocket before she could even pick up the car.

* * *
If we made it seem simple to pay your taxes and claim your prizes, we misrepresented the truth. In fact, there are lots of bureaucratic hurdles to leap through, and they start the instant the cameras stop rolling.

Andrea Schwartz is another The Price Is Right winner. * * * Schwartz explained. "After the show, you fill out some paperwork and basically sign your life away. You say that you’re going to pay the taxes on it.”

Some of those taxes are due before you take possession of the prize. Others get added to your regular tax bill.

"If you win in California, you have to actually pay the California state income tax ahead of time,” Schwartz said. “Then they give the okay to the dealers and to the vendors that are supplying the prizes. Then you deal with those people."
* * *

Even taking possession of your prizes can be a bit of a pain. Take the cars that Schwartz and De Lucia won. * * * Dealerships can be up to 150 miles away from your home. * * * the show gives you a 90-day window in which the dealership might have your car ready. But when you get the call, you only have 10 days to pick up your winnings.* * * And if you don't make the deadline, you forfeit your prize.

Between the travel and the taxes, it's easy to imagine situations in which a winner is better off saying "no thanks" and leaving the studio empty-handed, but no worse off than they were the day before.

Claiming the Other Prizes

* * *Some dealers make the recipient pay the shipping cost. Imagine what that's like for a large prize, like a pool table or an electric bicycle.

And What About the Vacation Packages?

At least you can sell your physical prizes. If you should win a trip to the Bahamas, your tickets and hotel stays are non-transferable.

Can't take off work in time to enjoy your free vacation? That's too bad. You'll just have to forfeit.

If you are able to take the trip, don't forget that you'll still have to pay taxes on the cash value. Since some of these trips are worth thousands of dollars, that can end up being a pretty penny. These vacations aren't quite "free" after all. In fact, nothing you win on a game show is.

What De Lucia Did With Her Prizes

As you'll recall, De Lucia only won $96 in cash on "The Price is Right." She was, of course, taxed on that.

But she was able to sell the car to a family member. She pocketed a little cash on that.

Selling her 3D cameras proved much more difficult. No one seemed to want them. After trying unsuccessfully to make some money back on the prizes, De Lucia gave up and donated them to a charity that helps people heal from trauma through artistic projects. At least they went to a good cause.

What Schwartz Did With Her Prizes

Schwartz had a little more to work with than De Lucia. She sold her shuffleboard and pool tables for a combined total of $4,500 (she was taxed on $14,000 for the tables).

She sold the prize Mazda 3 for $13,000. Once all the taxes were paid, she had a little money left over. She used it to start a food truck business called The Souper Wagon.

So Was It All Worth It?

Both The Price Is Right contestants say that they enjoyed their time on the show. And they'd both do it again in a heartbeat. * * * "But I’ll never stop thinking it’s funny that people trivialize a tax bill of $9,000ish as though it’s totally nothing (and that everyone could still easily keep this new car)

http://www.fashionbeans.com/content/thi ... 0020&loc=7

[oldr_n_wsr]

The gov always wants, and gets, it's fair share.

[rubato]

You can donate the car to a charity and deduct the amount the govt taxed you on. They can hardly argue that it is worth less than the amount they have just asserted it was worth. You might also be able to donate one of the trips via a church charity auction. But there are limits, we have had a few thousand in charitable donations refused because of the AMT. Not that it changes our behavior.

One of the very many good things about Jeopardy is that it's all cash! None of this overvalued crap merch. and trips.

yrs,
rubato

[Lord Jim]

When I read the OP, I had a recollection of seeing an Andy Griffith Show episode where Aunt Bee had this very problem...

So I checked, and as is almost invariably the case, my recollection turned out to be correct:

Aunt Bee on TV



The Taylors return to Mayberry after their trip to Hollywood and it turns out that Aunt Bee has had quite good fortune. It seems she appeared on a quiz show and won several thousand dollars worth of prizes. Bee is excited at all of the new things she's won, especially a new full length mink coat. She ever so slightly puts on airs but soon some of her friends, like Clara Johnson, become jealous and start to avoid her. Andy gets a bit of a surprise when he gets a visit from the IRS telling him that they owe over $1000 in taxes on the prizes won.

http://www.imdb.com/title/tt0512424/

[Long Run]

When I read the OP, I had a recollection of seeing an Andy Griffith Show episode where Aunt Bee had this very problem...

Good memory -- forgot about that one!

[Jarlaxle]

You can donate the car to a charity and deduct the amount the govt taxed you on. They can hardly argue that it is worth less than the amount they have just asserted it was worth. You might also be able to donate one of the trips via a church charity auction. But there are limits, we have had a few thousand in charitable donations refused because of the AMT. Not that it changes our behavior.

One of the very many good things about Jeopardy is that it's all cash! None of this overvalued crap merch. and trips.

I vaguely recall you can donate only what a charity actually gets selling the car...if they auction it (most do), that could be barely half tbe sticker price. Even if they sell it retail, you are taxed on the MSRP, a price nobody pays!

[Scooter]

State and federal income taxes are paid on the fair market value of prizes. The game show is going to put the MSRP on the 1099, but if she sells it immediately (at arms length, not to a relative), tax authorities will be hard pressed to dispute the amount received as the FMV.

The sales tax piece had me scratching my head, because California law says clearly that the operator of a game show that pays (or barters) for a prize given is seen as the consumer of the property, and is responsible for state and local sales or use taxes (depending on whether the supplier is in or out of state). The car is not subject to NY state and local use taxes because it was effectively a gift to her.

She has also grossly overstated the her state tax liability. She used a rate of 25%, but the prize value less standard deduction puts her in the 2% bracket in California. Which will be deductible against her New York income tax where, unless she was making over $200,000 per year, would have been less than 7%.

So her tax liability is more like $6,700 rather than $9,000 even if she is taxed on MSRP. If she can only get $15,000 for a car right out of the factory, that shaves another $2000 off the taxes and she comes away with over $10,000 in found money.

[Scooter]

And another thing...there would be nothing stopping her from asking the dealer to buy it back at a reasonably discounted price, and then earn additional profit when it is sold to someone else. That would have been a win-win, but it would have made it more difficult to get sympathy for her whine fest.

[Big RR]

And since they mention Jeopardy at the beginning, I think the only prizes that show awards is cash, so paying the taxes should be pretty easy.

If I recall, the guy hwo own the first Survivor show (and another later Survivor reunion as I recall) was jailed for not paying taxes on his multimillion dollar winnings. His "defense" was he didn't know he had to pay taxes, but one would think that anyone with htat much money would get some advice from a professional.

What I can't see with the show discussed is the complaint about having to travel up to--gasp--150 miles on a week's notice to pick up a car. Unless the dealer is in the middle of nowhere, that hardly seems like an imposition.

[Long Run]

If I recall, the guy hwo own the first Survivor show (and another later Survivor reunion as I recall) was jailed for not paying taxes on his multimillion dollar winnings. His "defense" was he didn't know he had to pay taxes, but one would think that anyone with htat much money would get some advice from a professional.

Yeah, that was a real Hatchet job on his tax evasion.