"Only two kinds of people complain about taxes--men and women."
- Anonymous
Last week on her afternoon television show, Oprah Winfrey had a little gift for each member of her studio audience. She is often generous with those who've made the trip to Chicago to see her in person, handing out books, perfume, home accessories, CDs and other paraphernalia. This time, however, she outdid herself. She gave all 276 people who were there a brand-new Pontiac G6 sedan. Wow! They went nuts.
Unfortunately, there was a rather serious catch associated with the lucky recipients' acceptance of these sporty new vehicles:
"Yet while the folks on 'Oprah' screamed with excitement over their new rides, out in the real world, tax professionals were trying to calculate the wreckage come April 15. Over on TaxProf Blog, where experts can banter about hypothetical problems...they're buzzing now about the insanely complicated tax implications of the 'Oprah' giveaway."
Yuk! Based on tax expert Brenda Schafer's estimate, come April Uncle Sam will be looking for anywhere up to $12,000 in taxes on these windfalls:
"...there's no getting around the fact that it's a prize for being in the audience. And according to her rough, unofficial calculation, someone in the 15% federal bracket (making, say, $28,000 as an individual, or $56,000 if filing jointly) and a 5% state bracket who gets a $30,000 car...will owe an extra $6,000 in taxes. For a single earner in the 33% bracket kicking in at $143,500, the car adds $12,000 in tax."
Is there any way these people can escape the tentacles of the IRS? Apparently not. Even if Oprah or GM decided to pay all the taxes for these new car owners, that wouldn't solve their problem:
"...even if Pontiac were to pay not only the sales tax but all the various income taxes that the recipients will owe on the value of their new cars, there would be taxes due on the value of any 'free' tax payments too, a calculation known as a gross up."
Well, maybe they could sell the car, use the proceeds to pay the taxes and have some cash left over. A possible solution, but then they'd have no car, which defeats Oprah's stated purpose of inviting these particular folks because they really needed transportation. Curses!
The bottom line is there's no way of avoiding the tax consequences, or even postponing them. Even if they decide not to take possession of their gift until next year, they're still stuck. Ms. Schafer is quick to point out, "You got it when you got it. You see, there's this thing called the 'doctrine of constructive receipt.' "
Well, at least they were all happy about their good fortune for a little while. There's something to be said for that. But I'm reminded of how my late father once cautioned me when I told him of a windfall that I felt was coming my way: "If something seems to be too good to be true...it probably is." Things didn't turn out as I anticipated and as was so often the case, his homespun wisdom was right on the money.
2 comments:
I'm reminded of the Jewish Proverb that states "A gift that eats is no gift at all".
I'm also tempted to pontificate on the evils of the IRS, but wont.
I will mention that Oprah's "gift", like so many of those offered by the government to "help" the poor, really serve to place the folks recieving the "gift" under a greater burden.
Then again, no matter how well intended, a publicity stunt is a publicity stunt, be it sponsored by General Motors, Oprah or government trying to buy your vote....
(Be nice, all....Notice I did not use the "D" word or the "L" word....
I don't know if you saw the Oprah show last week where she commented on the "tax" thing. It really burned her butt because she said everyone knew that they would have to pay the taxes. She said that everyone was given three options regarding the cars, 1) They could accept the car and pay the taxes, 2) they could take the car, sell it and pay the taxes, or 3) they could decline the car. No one declined the car. No surprise there! Would you decline a car given to you by Oprah Winfrey?
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