Date:  Fri, 16 Jun 2006
From:  Khanh

What is the tax consequence of winning a raffle prize? Which prize would have a better tax result: a home worth $800,000 or $500,000 in cash?

Thank you.

Answer

Date:  30 Jun 2006

Hello Khanh,

Raffle prizes are taxable income. The tax for a home worth $800,000 would be higher than for $500,000 cash. The home would still be a better prize, after income taxes. If you wanted to keep the home, you could probably borrow the money using a mortgage secured by the home to pay the tax.

Good luck!

Mike Gray

For answers to new questions, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight by filling out the form below.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.