State & Local Tax Blog

Win this $100 Raffle and You Could Owe $150K in Income Taxes

The Herald-Mail newspaper had a story about a house being raffled off for charity purposes. The house was appraised for $390,000. The newspaper asked a CPA to figure out what taxes the winner would owe. In this case, a $100 purchase would net you a tax bill of $150K.

But, it would still be worth it, of course. Here’s why:
“Nonetheless, paying $100 for a ticket in the ongoing San Mar Children’s Home raffle for a $390,000 house still could be a pretty good investment, according to an official with Smith Elliott Kearns & Co. LLC.

“You’ve basically gotten $240,000 worth of house for nothing” if you deal with the tax load by getting a home-equity loan on it for $150,000, said Kristi Glass, a certified public accountant and tax manager for the accounting firm.
“I mean, most people don’t have that low a mortgage on their house. … So as long as you can afford the payments on the home-equity loan,” you’re still a winner, Glass said.
Bruce Anderson, executive director of San Mar, has an alternative solution: You can sell the house.
“I’m saying even if the winner was to turn around and put it on the market for $300,000, they would have no problem at all selling it,” Anderson said. “With all this publicity, there’s any number of people interested.” risis.

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