Slashdot Mirror
Uncle Sam Spoils Dream Trip To Space
gollum123 writes about a dream come true and a dream dashed. Brian Emmett, a software consultant from the San Francisco Bay area, entered a contest sponsored by Oracle in 2005. He answered some questions on Java coding, won a free trip into space, and then reluctantly gave it up. The latter decision came once he had computed the taxes he would have to pay on the $138,000 prize — roughly $25,000. From the article: "Since the Internal Revenue Service requires winnings from lottery drawings, TV game shows, and other contests to be reported as taxable income, tax experts contend there's no such thing as a free spaceflight. Some contest sponsors provide a check to cover taxes, but that income is also taxable."
It may have been a dream dashed for Brian Emmett, but it most certainly was a dream come true for headline writers. They leave no cliche unturned:
... the final frontier for space rides
* There are no free rides to outer space
* Dream free trip to space brings black hole in wallet
* Win a free ticket to space? Read the fine print
* Taxes
* Space tourism yet to take off
* Free trips to space pose some taxing dilemmas
etc etc etc.
There are shills on slashdot. Apparently, I'm one of them.
The companies offering the prizes should be paying the taxes. 'Nuff said.
...all things considered.
I mean, we're talking about a trip into space. Considering the normally prohibitive cost of recreational spaceflight, $25k almost seems like a bargain. I've seen people blow that much on timeshares for goodness sake. If nothing else he could write a book about the experience and recoup some of the expense.
The Slashdot Limerick
What if instead of giving him a free trip they gave him the chance of take a discounted trip, only charging him $1?
"In Soviet America, Passport Stamps You!"
If they award him the prize while he's in space, do US tax laws still apply?
Seth
$5 / month hosted VPS on linux = awesome!
I find it unbelievable that a 'software consultant' cannot stomach a $25'000 fee for something he wanted so badly. TFA even says he would have a strong case not to pay until he receives his flight, and could pay in installments.
If the guy is worth his salt, and with the publicity he would get from winning the Oracle competition, I see no reason why a decent consultant could not have that paid off in a year.
(Disclaimer: I'm not an accountant or a tax geek so I don't know whether that would really work out).
So am I. Is the consolation prize a sheet of acid tabs and a DVD of 2001? It always works for me.
...when you get kidnapped by Aliens?
Yeah, I'm sure he had a problem affording it... but I'd have gone even though that's a substantial portion of my yearly salary. The only thing I can think of is that he might have been in the middle of a divorce - and if his salary was reported to be 138k higher per year, then his soon to be ex might have a much higher alimony. One that he couldn't afford to pay.
Your sig(k) has been stolen. There is a puff of smoke!
Some contest sponsors provide a check to cover taxes, but that income is also taxable.
Fortunately, this series eventually converges to values small enough to lose it amid the rounding error on your taxes.
If you'd been following the recent story regarding China's lil' missile they used to destroy an old weather satellite, and then saw US's reaction and statement about it you'll know that America owns space, and possibly everything. :)
Besides, they are already floating lawyers floating in space, waiting.
So are they going to start charging astronauts $25000 too?
the negative effect of taxes on the economy. While this example is extremely exaggerated, the same thing happens countless times on a much smaller scale every day - I don't buy that shirt, for example, because taxes make the price $22 instead of $20. An otherwise mutually-beneficial transaction is lost.
Studies indicate that about fifteen cents are lost this way for every dollar the government collects for the major taxes (income, sales, property). That implies that the we have to spend a $1.15 just to get the government a dollar - and hence we always overpay for government services.
I call BS. I don't think he wanted to go in the first place. Nobody with a dream of space flight would pass this up. I'm a freaking grocery/dept store clerk and I could put 31k on a credit card. Sure that is really dumb thing to do, but man, this is for space. While working my butt off for the next billion years to pay it off, I could have one heck of a story to tell.
They attack this problem in Australia (and other places) by taxing the organiser of the lottery, all advertised prizes are for the "after tax" value, if it says "First prize: $1M" and you win, you get $1M. The taxman doesn't hassle you because he took his cut before you got your cheque. Not sure how you would go if you won a foriegn lottery?
OTOH: Get a $50K reward from Loyds of London for bravery (of the "are you insane" variety) that saved an oil tanker from sliming the costline near Perth and you will have to pay tax as if it was additional income for that year, ie: the taxman will take 30-50%.
And did you exchange a walk on part in the war for a lead role in a cage? - Pink Floyd.
FTA: ...report the $138,000 galactic joy ride as income...
I heard American's don't have to pay income taxes, in this documentary, America - Freedom to Fascism.
It's got an interview with a lady who was on a jury and neither the prosecutor or judge could state the law that says a person has to pay income tax. So the jury found 'not guilty'. America - Freedom to Fascism
Disclosure: I'm Australian, I don't pay American taxes anyway.
Some contest sponsors provide a check to cover taxes, but that income is also taxable.
It's a kind of infinite recursive descent to RUIN!
Rome taught me patience and assiduous application to detail. Virtues which temper the boldness of great, general views.
I fail to see how a free trip to space equates to income. Yes, the trip ordinarily costs $138,000, but this paticular trip was priced at "Win this competition". That doesn't have any monetary value. X% of "Win this competition" is not equal to $25,000. As others have mentioned, the company could also have priced that paticular seat at $1 and been well withing their rights. This story seems bogus.
This kind of reminds me of property taxes, where someone walks up to your house, says "I reckons she's worth about this much, so you pay me that much", despite the fact that your house is earning you no income and will be taxed anyway when sold or inherited. It doesn't make much sense.
I'm a believer in financing the state through taxes. But I'm also of the opinion that there should be some kind of logic to tax. Charging people money for something when they haven't actually made any money, or indeed materially benefited in any way, as in this case is like something out of a one dimensional folk tale. When tax is levied, there should always be a question, why is it being levied?
We need taxes. But we also need to remember that the government is not our landlord. It is wrong to have a tax on simply being alive. Tax should be avoidable, if you have no money to pay any.
May the Maths Be with you!
There have been all sorts of endeavors that were canceled once the tax implications were considered. All businesses have to weigh the tax implications of every decision made.
...he wouldn't have had to pay a dime, Up North. Gifts or prizes are _not_ taxable.
Saw it referenced several times in the article, but the address was never quoted.
The entry in question is the top one on that page.
It is similar to what happens in countries like the Netherlands (or other nordic countries) where people *avoid* pay rises because sometimes having a rise of 10% they have to pay more taxes and end earning less than what they earned before the "raise".
In the 6 years that I've been in the Netherlands (3 as a manager), I've never known anyone to turn down a pay raise. (If you know such people, please let me know... we might want to hire them.) The system does not work as you describe. Making more money always gives you more money.
There may be other reasons to worry about a high income, such as being forced to leave rent controlled housing, but this is not tax related.
He might have started some sort of charity thing and solicited donations and collected via eBay. He would have had a whole year + extensions after the trip or something along those lines to make it all happen. You think there aren't 25,000 sympathetic geeks all over the world who wouldn't have given a dollar to let this guy go into space? I would have. I'd kick in more.
bummer to give up the trip, but i can see how $25k might be a porblem [sic]. In a circumstance like this i'd try to tap into the pop. culture for resources. Whore myself out for endorsements, appearances, start a "training for my flight" blog or something. Being a lucky space prize winner has _got_ (one would hope) to carry enough cachet that a clever chappie could leverage it to earn the money required.
I think he's getting off lucky. The IRS might suddenly decide that the company is underestimating the value of the trip, and place its value at $20M US, which up to now has been the going rate. There - pay taxes on THAT! ;)
Seven puppies were harmed during the making of this post.
I'm sure the Porn industry would pay 25K for the only video in existance of someone whackin in space.
Wanna fight ? Bend over, stick your head up your ass, and fight for air.
There is no free launch
Oracle. They should have paid the taxes as well. It was very obvious from the beginning that Uncle Sam would lay his long bony arms on this.
BTW, it is not too late for Oracle to do it now.
I do not believe in karma. "Funny"=-6. Do good and forbid evil. Yours, Oft-Offtopic Flamebaiting Troll.
I'm surprised Oracle didn't solve this. They could have paided the "in kind" taxes so that there would no burden on this guy. My employer did this for my relocation and sign on bonus.
To Copy from One is Plagiarism; To Copy from Many is Research.
Shouldn't this story have been labeled under Politics rather than Science?
http://www.fairtax.org/
Like the cliche says: "Insanity is doing the same thing over and over again and expecting different results." The U.S. Tax code has been re-engineered for one purpose to empower the powerful "Professional Politicians" and special interest groups and lobbyist, while holding back the common man. We went to war against England over a 1/2% tax on tea.... Then again the British Pound Sterling was worth a lot more than our current neutered U.S.
Dollar.
No free spaceflight?
/me confused
If I buy someone a plane ticket to come visit me, they're not taxed for it as income.
If Oracle buys this dude a spaceflight, why should he pay tax on it?
Someday, I'll have a real sig.
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
Ratified 02/13/1913
Therefore, Zeno might say, the swiftest accountant can never overtake the tax man. Thus, while common sense and common experience would hold that a company can pay its taxes, according to the above argument, it cannot; this is the paradox.
Reduce, reuse, cycle
You'd have a hard time convincing any reasonable person that a space flight was income.
That would be considered income, because no "arms-length" transaction would have resulted in a sale of a trip into space for $1. Accordingly, the difference between the fair market value and the $1 was a gift to you. Gifts are income. You can even give someone money by not taking money away from them! Observe: I extend my neighbor Bob a loan this year for $5,000. Next year, I say "You know, forget about that loan". BLAM. He has to declare an extra $5,000 (plus fair interest!) in income, and I have to fill out a Form 1099-C attesting to that amount (which, naturally, tips the IRS off to the fact that if Bob doesn't disclose the value of the loan was forgiven to go after him).
All sorts of things are income, although many aren't routinely claimed as such. Ever won a soda at McDs during that Monopoly promotion? Income. Found a $10 bill on the sidewalk? Income. Taken a pen home from work? Income, unless you returned it. The difference between these and the space trip is that if you had somehow neglected pay $25,000 worth of taxes because of your income, as opposed to a few cents, the IRS *will* hit you like a ton of bricks.
Help poke pirates in the eyepatch, arr.
This guy either had very bad tax advice or is using the tax code as an excuse to wimp out of a somewhat dangerous experience.
As the article and any decent tax account would tell him, he would not be responsible for any tax unless and until he actually accepted the ride into space. This means he could have put off on any decision on whether to accept the prize until the very last minute. At least as far as the tax man is concerned.
The only craft that matches the specs of those announced in the contest press release are those of the Virgin Galactic SpaceShip 2. And since Virgin Galactic's commercial craft is a minimum of 2 years from sending customers into space, he had at least that much time to defer his decision. His financial situation could be much improved by then. Since space craft are rarely delivered on schedule, he would likely have had even more time to defer his decision.
Then there's the possibility that he could have worked his way out of paying much of any tax at all. As others have suggested, if he could have taken some on professional duties in the form of writing about his voyage, he could have partially or wholly written off his tax burden.
So why did this guy refuse the prize two or more years before it would have had any financial impact on him? Why didn't he look into any professional options for writing off the tax? Good question. My guess is either very bad tax advice or sheer lack of courage.
If he had moved to Canada just before the drawing, and won the contest while living and working there, the contest would not be taxable, since Canada does not tax lottery or gambling winnings, unless they are your "primary source of income" (i.e. unless you're a professional gambler / poker player / etc).
I mean, after all, how often do you get to go into space?
With all the publicity this guy has had, I suspect (hope even?) that some media outlet will sponsor his taxes just so they can get the story.
Remember when Oprah gave away cars on her show to impress the world with her Mother Theresa-like saintliness? Those people had to pay taxes, fees, licensing and of course insurance on their own as well. But when you can't afford a working car you probably can't afford the ancillary costs of a new car either. Yeah, other people's ego is a bitter pill for you to swallow.
Does it really work like this? Where I live (Portugal), whoever offers the prize is responsible for all the taxes associated with it. Think of the lottery, the announced prize is always "exempt" of taxes for the winner. And I said "exempt" because taxes are still paid by the contest maker.
if the tax rate is 10%
and the prize is 100$
then you award $112 to start.
if it's 175 thousand
and the tax rate is 14%
$204,000 awarded leaves 175440 for prize money, and 28560 from taxes
every day http://en.wikipedia.org/wiki/Special:Random
- cohesion
- coherence
- coercion
- other (please specify).
Fucktard.It's true I tell you, feller at work's next door neighbour read it in the paper.
If the trip to space was Research and Development it would be tax free. It seems straight forward create a business, and plan an experiment in microgravity.
Seems like he had very poor tax consultants.
don't cut it off www.mgmbill.org
I wouldn't be surprised if he were still taxed because he was awarded the prize, and then the company giving the prize got taxed because he then gifted it to them. Anybody remember the Singing Nun?
Quidnam Latine loqui modo coepi?
Actually all anti-depressants increase the rick of suicide.. Thats how you know its working (TM). :)
But seriously, there people with highly depressed states, that don't even have the motivation to commit suicide. Anti-depressants can lift someone up just enough to give them that motivation. Technically anyone who is severely depressed should be on suicide watch when first taking a new medication.
The more you know!!
There might be another alternative - what about they hire him for the duration of the flight, say, as research for the company doing the rides -- they hire him for minimum wage for one day, and give him some special questionnaire to fill out after the flight. In this case, his ride would be work (gather information on the "end user experience")...
He might have to tax the minimum wage, but the company could completely write off the money spent to send him to space in the first place, as it's a work requirement. (i.e. treat the space ride as a "business trip")...
(oh - and yes, if he researches the 'experience' of the offered flights, it should well be possible for him to completely (and determinedly) "enjoy" the flight - so as to be in a better position to say what the company might want to improve for future customers...
Shouldn't that be possible?
didn't you see all that class warfare the last election cycle, about those people who won lifes lottery (the work hard, makes great money, etc) and therefor they should be taxed for it!!!
thats the mentality of it now. the politicians have for so long beat it into people's heads that everything needs to be taxed, and after all if its a lottery or such, its only fair to tax that too.
Face it, people will not wake up. Nothing you have is safe from the tax man. In my state we pay ad volarem (sp) taxes on automobiles we already paid sales tax on! Your house, gone if you don't pay taxes, after all you don't own the land its own or even the house itself in this day an age as any government can take it for tax purposes. They can even raise your taxes and you have to fight them to get them back inline, trouble is they make it so you give up as it will cost more to fight than to give in.
Don't worry, they will tell us they will have to raise taxes on businesses, as corporations are very evil. Too bad they are tax collectors as no business pays a dime it didn't get from us. Same for making contest offering companies to pay the tax, it will simply come out of someone else's pocket.
I think the best example was all the heartache caused over Oprha's gift of cars that one year. How many didn't take possession of the car because of taxes or loss of benefits?
Governments make most corporations look sane.
* Winners compare their achievements to their goals, losers compare theirs to that of others.
"In substance, the court holds that the Sixteenth Amendment did not empower the Federal Government to levy a new tax." ... not ... wages or labor.
- New York Times - January 25, 1916
The definition of income in the constitution was given in the Eisner vs. Macomber [1920] case, and it turns on gains or profits that are made from some activity.
- Edwin Vieira, Prof. Constitutional Law
Doyle vs Mitchell...1918...[income means]...the idea of gain or increase arising from corporate activity.
- Irwin Schiff, Author
Income means a corporate profit
- "America - Freedom to Fascism"
ie: you, the individual do not pay income tax, it is only a corporate entity that pays.
Now, there's a rabit hole I've seen about how names in ALL CAPITALS makes you a representative of the corporation of your own name, and that corporation is created with you birth certificate, but I don't know about that.
Miller v. United States, 868 F.2d 236, 241 (7 th Cir. 1989) (per curiam) - The court stated, "We find it hard to understand why the long and unbroken line of cases upholding the constitutionality of the Sixteenth Amendment generally, Brushaber v. Union Pacific Railroad Company . . . and those specifically rejecting the argument advanced in The Law That Never Was, have not persuaded Miller and his compatriots to seek a more effective forum for airing their attack on the federal income tax structure." The court imposed sanctions on them for having advanced a "patently frivolous" position.
United States v. Stahl, 792 F.2d 1438, 1441 (9 th Cir. 1986), cert. denied, 479 U.S. 1036 (1987) - Stating that "the Secretary of State's certification under authority of Congress that the Sixteenth Amendment has been ratified by the requisite number of states and has become part of the Constitution is conclusive upon the courts," the court upheld Stahl's conviction for failure to file returns and for making a false statement.
Knoblauch v. Commissioner, 749 F.2d 200, 201 (5 th Cir. 1984), cert. denied, 474 U.S. 830 (1986) - The court rejected the contention that the Sixteenth Amendment was not constitutionally adopted as "totally without merit" and imposed monetary sanctions against Knoblauch based on the frivolousness of his appeal. "Every court that has considered this argument has rejected it," the court observed.
United States v. Foster, 789 F.2d 457 (7 th Cir.), cert. denied, 479 U.S. 883 (1986) - The court affirmed Foster's conviction for tax evasion, failing to file a return, and filing a false W-4 statement, rejecting his claim that the Sixteenth Amendment was never properly ratified.
Above posts are wrong, the dutch taxsystem is broke
It is not that the tax brackets directly cause you to earn less, but income depending benefits.
The mayor one was indeed the health system that above some income forced you to very expensive insurences.
The other mayor one is house subsidie, in short you earn more, you don't get it any more.
But there are a lot more, which counted up together result in a net loss when you have a raize.
Another example about the injustice in holland.
We as a couple had state help while studying, but were only allowed to make a certain amount in side jobs.
Then the company where my wife worked changes his structure and as a result pays out saved holidays.
The result we get above the amount what could be earned and loose the whole benefit.
It was better for us to NOT work.
Also the more specialized your job, the more time you spent in traveling as the workplace is likely further away.
these 2 to 3 hours extra traveling is not paid, though any john doe working 5 minutes from a plant finds he has the right on the same payment, or even sitting home scratching his #$%^ and wants money.
and that is the problem with holland, people are very hard incentivated to NOT work, to NOT study.
although this has changed the last few years,
anyway I understood very well how holland would not be the the country for people that have opportunities.
In the end you will still have nothing, in short your ass and everything belongs to the state, from birth till death.
So I emmigrated as do a lot of dutch.
As a result holland has almost a population decline.
well good luck for the ones staying behind.
greets
There are no stupid questions, Just a lot of inquisitive idiots. (from a good friend)
Married, with children.
Sorry man, if I was in his shoes after much string-pulling and financial handwaving I would probably come to the same conclusion. The welfare of my wife and two children (and last tiny remnants of college loans and the mortgage, when I hit 31... ) is way more important than a **suborbital** joyride.
I guess I shouldn't be shocked that so few people know this about the tax code, after all, they keep voting for the Demopublican party that overtaxes, overspends, and tries to regulate behavior with tax codes.
If Brian Emmett doesn't want to go and is looking for someone to give the tickets to then can I put my hand up. I'm also happy to pay the US the 25K. Can I go? Can I? please...
The Uranus Experiment. The porn industry would probably have an extra 150k lying around to send up an actress with him. According to his blog, he's married but hey - you have to have some priorities.
So, can someone less lazy set up an online petition?
They don't advertise it as X over Y years, they just say "Jackpot of X".
If he sold it he might be able to argue on his taxes that the value he sold it for was the actual value, and only pay taxes on that money. He would have come out way ahead, even with the extra $1k for the tax attorney he would probably need.
...what the taxable income on a free lunch?
Mod Karma -1: I sed bad wurds. If I cep my mouf shut, I wud be at riyses.
EVERYONE who wins something in the US pays taxes on it. Anyone who wins in a lottery or casino pays taxes on it. Anyone who wins a car on a game show pays taxes on it. That's the way it is and has been for DECADES.
If you want to get mad, get mad at the organizers. When I relocated a few years ago, my company not only gave me the money for the move, they also paid the taxes on it (at a flat rate). Sure, I still owed some money, but at least it wasn't on the total amount. Tag it as 'spending money while in training' and caution him not to spend it.
It would have been very easy for the organizers to do the same thing. They should have been fully aware of the tax implications of what they were doing and provided for it.
This is not news, this is a whine festival.....
I rarely read replies, it's my opinion and if you thought about your opinion a little more, I'm OK with that.
Use hundreds of computers around the world as proxies to shill on your own auction.
Profit!!!
Laugh all the way to the bank.
Pay taxes with a smile.
Excuse me, but please get off my Pennisetum Clandestinum, eh!
Maybe Oracle should have hired him as an off-site Java contractor at a rate of about $40k per year. If they needed him to answer any more Java questions they'd have his full attention. The 405k would have been enough to cover his income tax on the 'consulting' postion and the 25k in taxes for the free ride.
The government might not be smart enough to fall for that, but surely Oracle has some clever lawyers to work it out.
What a pansey... He is a 31 year old software consultant and he can't get afford $25000 bucks for a once in a million lifetimes event? Get a signature loan or something. Geez I don't want this programmer writing code for me if he can't figure this one out. Does he still live with his mother?
Ad eundum quo nemo ante iit!
What's really funny is that they assess it as a $138k value, but it will cost this guy $25k to do it, and he decided no. In other words, the space trip is actually worth less than $25k.
To him, of course. If you auctioned something like that off, it would very likely get more than $25k. So the actual value is subjective. Is there any way to tax a subjectively-valued thing that is actually fair? Tax it as $138k and it's unfair. Tax Bill Gates for it as $1k, and I bet some idiots will bitch about that too. The only fair thing that everyone would actually agree on, is to realize, "no it's not really income at all, the rules are unfair" and don't tax it at all.
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
Sorry if someone said this, but I read a lot of posts and didn't see it.
If you win a game show (i.e. cash), you get the amount left over after tax. Why couldn't/wouldn't the agency that gave this award out also give a $50,000 prize which would probably be taxed in half and still have $25,000 (USD) left over to pay for the "tax" on the trip? Would that even work, if they had been willing to do it?
Starmen.net
another good reason for pushing the FairTax and getting rid of Federal Income Tax altogether.
But if the exec quits/is fired, they don't get to keep the stuff... so it's not as unfair as you make it out to be. It does let the exec dodge some taxes, though.
You are reading a copy of my copyrighted post.
You guys surely don't know places like Brazil. Here in Brazil, taxes take about 40% of our salary. Enterprenerus have to pay *120%* taxes on all of the employees' salaries. Did I mention that you *CAN NEVER RELY ON THE PUBLIC SERVICES*?
I'm not talking about a little overcrowded hospitals. I'm talking about waiting 12 hours (like, 11:00pm to 11:00am) inline for a simple appointment, and sometimes having to return later because doctors are on strike.
I'm talking about waiting several months for an urgent surgery, while our stupid president tells us that the brazilian health care is "almost perfect".
I'm also talking about several months to have all the paperwork you need to start your own business. Having to keep tons of tax papers because the Brazilian "IRS" sometimes will charge you 2x, even 3x the same tax, because they somehow forgot that you already paid such tax. Sometimes you can't pay the tax because they won't accept "DARF" docs below a certain ammount (say, U$ 5.00). So, you can't pay the tax, but you'll be fined because you didn't pay.
So, we pay 40% taxes, but that money goes down the drain. We're not paying for decent services, we're just giving the money away, and having to spend extra bucks for everything we need. We even pay decent ammounts of money on taxes for your automobiles, but we have to pay lots of aditional fees whenever we're travelling, because roads are maintained by private companies.
BTW, Lula makes Bush look like Einstein. I'm not kidding. He's that stupid.
The states pay for roads, education, and police. If you were paying for a road maintenance company, private schools, and a small mercenary force, it would still be expensive to work.
If you want to avoid taxations on savings, go for an IRA. That way you only have to pay taxes once on the money.
You are reading a copy of my copyrighted post.
Say the $138k prize would drop the guy into a 28% tax bracket (for argument's sake). Then the total value the company has to give him to cover taxes is $138k/(1-.28) = $192k. Minus the value of the actual trip, the company writes him a check for $54k, and that will cover the taxes on the trip and the check.
Ok, if "Jenny" can get her credit card debt paid off for being a random girl, and Pirate Bay can raise 20k in a matter of days to buy an island that was never offered to them for purchase, I would *think* that a guy in the computer industry could setup a website asking for donations to "send me to space" and a latte says he'd be going no problem... Someone/thing seems VERY short-sighted here... 25k is a stupidly small number to NOT go to space considering everything... He could probably make that much setting up tip jars in his own town let alone utilizing the vast power if the intar-tubes (assuming they don't get clogged of course). If *I* were this guy, I would setup a website and ask for a 10 dollar donation and in exchange, you get a "salute" from space with your name or photograph or something (obviously pre-approved) that he could do that would "nifty-fi" the whole donation! Come on man, use that brain!!
Doing the Tax Man Dance, we see that the total cost to Oracle to award this guy his prize and pay his taxes would be $168,488.
Original Prize = $138,000
Taxes due on original prize = $25000, a rate of about 18%.
We'll assume the tax rate is just one bracket of 18% for all levels of income.
Stage one: Oracle pays $25000 for taxes. Tax on stage one: $4500
Stage two: Oracle pays $4500 for Stage one taxes, Tax on stage two: $810
Stage three: Oracle pays $810 for stage two taxes, tax on stage three: $146
Stage four: Oracle pays $146 for stage three taxes, tax on stage four: $26
Stage five: Oracle pays $26 for stage four taxes, tax on stage five: $5
Stage six: Oracle pays $5 for stage five taxes, tax on stage six: $1
Stage seven: Oracle pays $1 for stage six taxes, tax on stage seven, $0.18, round to to the nearest $1, tax dance over.
Grand total out of pocket for Oracle: $168,488
Out of pocket for Major Tom, $0
To be totally transparent, without any accounting voodoo, then Oracle should make the payments in sequential years over the next seven years. They would write the appropriate tax check in time for the winner to submit with his yearly return, beginning the year after he actually recieves his prize (i.e, takes his ride). Uncle Sam gets his money, Major Tom gets his ride, Oracle gets extra Good Guy publicity! Win-Win-Win!
Math is funny that way.
Could those three little words prevent the IRS from taxing this particular contest? It's not like the guy actually won $138000 in cash. It's a trip, it is not income. So should Oracle have put "No cash value" somewhere in the rules of the contest and save the winner from having to pay tax?
I like being able to see exactly how much of what I'm paying is taxes. I've come across a few gas stations that actually do this - although the posted price is with tax, just like everywhere else, there's a sticker on the pump that says "$X of the price of this gas is state and local taxes". The consumer *should* be informed of what taxes they're paying, and not have to look it up somewhere every time they travel to different city or state. Otherwise, just like with gas, you get so used to seeing the number that you tend to forget there's any tax figured in at all, let alone how much. The more aware people are, the more critically they'll think about tax issues at election time.
Warning: Apple/Nintendo fangirl. Likes her electronics cute & cuddly. May be rabid.
I pay more than %30 in (federal) income tax in the US. Living in a state like Illinois, they can easily take another %10. I then have %7 sales tax on ALMOST everything (except certain things like unprepared food) and outrageous property taxes. Oh yeah, my employer and I also pay %100 of my medical insurance. I can't wait to find out what percentage of my income I get to hold onto this year (probably a bit less than %40)... Not to mention paying social security, etc for a system that might not be there in 40 years when I need it. Meanwhile, we still don't have any national healthcare or guarantees of higher education. We can all complain about something!
All of this in one of the wealthiest countries in the world. The thing about Brazil (and other countries like it) is that as long as the average (and minimum) incomes are so low taxing %40 of income still isn't much money... As I'm sure you know, the "minimum wage" in Brazil is something like 300 reals / month. That's about $140 US. Even taxing as much as %40 is only $56 of income for the government. With a less burdensome tax code (taking maybe %10), you get $14.
According to the CIA world factbook, the GDP per capita in Brazil is about $8600. In the US it is $43,500. Obviously that turns into MUCH more income for the government on all levels...
This bad press should be directed toward Oracle - why wasn't their "free" trip really free?
Oracle isn't charging taxes. Moreover, if the contest included taxes paid, the portion used to pay the main taxes is still... yup... taxable. They're unavoidable.
As for the working $5 and getting a $60k car, there can be clauses to cover this. Check out Canada and many other countries sometime that do not tax lottery winnings, even the big jackpots.
In countries that don't tax lottery (see: Canada), there are laws for that sort of thing. First of all that the "lottery" in question has to be supported by the gov't lottery corporation. So a company can't pay you in cars, because the gov't would not legitimize the lottery.
Further to that, big corps in the US (and other countries, free lottery or no) do pay their bigwigs with cars etc. The cars belong to "the company" on paper, but in all actuality belong to the bigwig. In many ways these types of accounting let the big earners actually "earn" less on paper while having the company dime take care of their lifestyle, and the company can expense to cost of another car and gas, etc.
And if they shot some guy up into space on a contest they wouldn't be liable for his safety at all...?
I think this buddy gave up his "childhood dreams" a bit too quickly.He could have arranged for instalments and take a long-term credit. How much is 25K$ for a senior software engineer? How about sponsoring? I'm sure many companies will pay a lot to have a space tourist wear a shirt with their name on it - starting with SUN: "I won this ride using the SUN Java language".
Also, I suppose this guy is bright enough to be on the top scale of this industry since he won a java contest so repaying back would take only a few years - maybe 10 - but how much is it compared to a lifelong dream?
I'm far from the 100K$ a year range and probably cannot afford 25K$ out of the box, but I would have very very seriously considered any possible option.
Its obvious you computer nerds are paying WAY too much in taxes. Ya'll need to spend a hour with a good tax accountant and learn some of the ins and outs of our tax system.
,including himself, can pay those taxes and it would not be considered a taxable gift. WHY? Because if you tax a tax it becomes a never ending loop of taxation. The IRS is not intersted in that. All they care about is what's due now and whether or not it was paid. They could care less who pays it. Corporations pay US Income Taxes for their execs all the time. That money paid to the IRS is not taxable.
First of all, as the article impies, you can't tax a tax. It's in the Constitution. If the guy was gonna owe $25K in taxes for the space ride, ANYBODY
Secondly, whoever pays the tax can deduct it from their income! HOW? Because of the rule of NO double taxation. If I use my money to pay your taxes, I get a deduction from my income. Think about it. If I didn't then not only did the IRS get my money that I used to pay your taxes, they would also get taxes on that money... no double taxation... can't tax a tax.
Finally, he had FOREVER to pay those taxes. HOW? Since a space ride is not a very liquid asset like a plane ticket, the IRS probably would have ruled that he didn't owe any taxes until the service was performed; if at all. It works like this. Lets say as a bonus last December, your company gave you two tickets to this March's St. Patty's day Parade in NYC. You'd owe taxes on the ticket for 2006 because that's when it was awarded and the ticket is a very liquid asset; almost like cash.
However, if your company says "Bill, you're award is a flight on our jet for you and your wife to NYC for next year's St. Patty's day Parade in NYC, then you wouldn't owe the tax until the service was performed (2007). WHY? Because a ride on a corporate jet is not a liquid asset and its value is not realized until the service is performed. Also, you could argue that it's value is no more than a cut rate airline ticket since you have no control over the scheduling or seating arrangements; even if they are plush (again which the IRS could care less about).
But I wonder... Any company I know of would have paid him the $25K for a side endorsement deal. Or, he might have been able to sell his ride. My guess is he chickened out and he's using the IRS as a scape goat.
Here is a simple solution from metamathematics for that problem: Sell the $138,000 prize for $1 to your mom and make the tax calculation:
$138,000 income
- $137,999 loss from selling
--------
$1 net income
"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."
Although the previous poster was correct that you have to pay income on the most amazing things, like forgiven loans, bribes, or stolen goods -- iff the goods aren't returned to the legal owner within the tax year in which the theft occurred. I hadn't realized that hobbies have special status: you have to pay taxes on income derived from hobbies, but can't claim losses from those transactions.
Nostalgia's not what it used to be.
When the lottery says, "Jackpot prize $15 million" they are saying "Jackpot prize $15 million". In other words, the $15 million is what is available for reward which gets divided among all winners, so that the payouts would look like this: $12mil to all top winners, $2mil to all 2nd tier, $0.5mil to all 3rd tier, $0.25mil to all 4th tier, etc. The payout structure is not this rigid, but the point is that the "Jackpot" is the total available winnings. To be clear on this, that $12mil is divided between all top winners and not $12mil to each.
You mention the annuity payment scheme - in some states there is an option of being awarded in one payment, with a smaller payout.
On the tax issue:
There are a few taxes that are involved in Lottery winnings: (1) Federal income, (2) Federal income, (3) State income.
- Federal income - the IRS usually takes 25%-28% from any check over $5000. It's 30% on any win over $600 if you don't have a SS#. This is from the Energy Policy Act of 1992, section 1942 - but don't ask me why gambling is covered by an Energy Policy Act.
- Federal income - your overall income was altered by the winnings. This probably put you in a higher tax bracket. That's right - slightly more taxes.
- State income - most states have income taxes (the same idea as point #2). And even if you live in one of the 7 states that lacks income tax, the lottery-issuing state may not be the one you reside in (hint: the issuing state taxes your winning). Then again, some states (like NJ) don't tax these winnings (at least for NJ residents).
Since there are a few tax variables, it's easier for the lottery agency to say, "You won the money, you deal with the taxes applicable to you." That's why the situation is backwards.This is not my sig
There's little sympathy for "rich" folks (read: anyone who doesn't work at a coffee shop), so I don't expect the law to change anytime soon, but this is an ongoing problem where the government taxes you on money you don't have. The AMT is the chief culprit here. I get that we need to close loopholes for rich people not paying tax, but at least wait until they have the money in hand, no? I'll be facing the AMT next year and the thing is that I'll owe taxes on options that I probably won't be able to sell. So I may have to declare bankruptcy. Or if I can sell them it might be at a steeply discounted price so that I may end up paying, in effect, 100% tax on them. Maybe even more, or, if I'm lucky less maybe only 80%-- but how does that make any sense? How about I pay the intended rate on the money once I actually have access to it? I'm happy to pay my share of taxes when the time comes, but AMT has some ridiculous side effects.
Cheers.
It is so frustrating to see everybody repeating the Feds mantra "I have to pay the tax, I have to pay the tax, ..."
Why not get informed at - e.g. www.nontaxpayer.org and cancel your account with the feds.
Snoopy did!
There is this great strip with snoopy sitting on his dog house typing away on his typewriter: Dear IRS, Please cancel my subscription ...
I'm glad we're taking a more enlightened view of property. Unrestrained property rights invariably lead to massive concentration of wealth and economic feudalism. People have the right to limit what others do with property, as property is a socially granted, positive right. Owning property is the freedom to take away from the shared resources of the world, it is not the freedom from having your stuff messed with.
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
http://www.eminentbrain.com/2006/09/04/clipped-wi
The problem is not the IRS. The problem is Oracle. Oracle did not fully fund the contest. I am quite sure that Oracle employs accountants and lawyers whose familiarity with the tax code permitted understanding this problem in advance. Oracle could provide enough cash to cover the spaceflight and to cover the taxes.
MySQL is cheap. Oracle is cheap bastards.
Here is another example of how stupid the US tax system can be.
However, what the IRS says is not always exactly what Congress put into the tax code. Read the actual code, and see. The IRS stretches the term 'income' beyond what Congress intended.
It can be less expensive to hire a good tax attorney than to pay the IRS more than it rightfully should receive.
These stories are always amusing, since the protestors are always the same ones who voted for higher taxes in the first place. Isn't it equality for everyone that you voted for? And if you can't get wealth for everyone, you'll just have to let no-one become wealthy.
I simply do not understand why any government would tax lottery/prize winnings as income. It simply makes no sense, as the article shows: a poor person could not collect on any non-cash prize due to the taxes imposed on it.
;)
Normally, one considers buying lottery tickets to be "a tax on stupid people". Simply because it's a very long shot gamble, and if those same poor people put their lottery money in a savings account, in a few years there's a non-trivial sum there awaiting the "winner".
Thankfully, here in New Zealand, there is no tax on prizes or winnings (even casino winnings) and there is also no capital gains tax. We need more citizens too.
How many escape pods are there? "NONE,SIR!" You counted them? "TWICE, SIR!"
"The other mayor one is house subsidie, in short you earn more, you don't get it any more."
Oh, the humanity! Once you can afford to pay the entire rent YOURSELF, they take away your subsidy! How can they be so cruel?
"and that is the problem with holland, people are very hard incentivated to NOT work, to NOT study."
The country even lacks millionair's assistance, would you believe!
"So I emmigrated as do a lot of dutch."
Good bye and good riddance.
Couldn't the space people "hire" this guy, pay him a dollar or something, as like, a contractor? I mean, i don't pay taxes on the chair I sit in at work...
The people defending these kind of taxes, by claiming "Well, taxes are needed to provide us with government services", are using faulty logic. In this case, the government IS NOT taxing the guy $20,000... because the guy is simply not going to take the space flight - He can't afford it!
However, if the government charged a lower tax... say $1,000, the guy might actually be able to pay, and therefore the government would actually make MORE money than with the much higher tax rate!
By raising taxes beyond a certain threshold, you actually LOSE tax revenue. Higher taxes != higher tax revenue.
Here is a good explaination:
http://en.wikipedia.org/wiki/Laffer_curve
You forget about all the lottery winner, gamblers, and a myrid of TV contestants who DO pay taxes on there winnings.
Yeah, this guy didn't accept it, but are you really thinking wa person winning 200 million will not collect because of taxes?
Yes, you can loose taxes if you tax to much, but in this instance this is not the case.
Now you brought up the Laffer Curve. Do you really understand it? Do you understand that each item taxed will have a different peak tax rate? And that the peak tax has been as high as 90% during some points in the US's history?
Never take the laffer curve in an absolute literal model for a tax revenue curve,and remember that it has no predictive value at all.
The Kruger Dunning explains most post on
Also on Google Video - Link
Leave it to welfare-mooching parasites and pork-crazed politicians to ruin the good fortunes of the hardworking man.
This just makes me hate the welfare-moochers and fat-assed politicos even more.
Knowing Google's lust for data collection, the Soviet Union is still alive and well inside the psyche of Sergey Brin....
Was the luxury car contest open to the public? Sounds like it wasn't a winning at all but a payoff. Why wouldn't that be taxable.
The big problem comes not with all winnings, but prizes that have some supposed "cash value", but that cannot be exchanged for cash.
I saw a beautiful example of such a bogus contest in some men's magazine:
Valued Running RealCost Running
Prize included airfare for two to NYC ooooooooooooooo 2500 2500 400 400
Reservations for two at some fancy hotel for 1 week 4900 7400 1000 1400
Entry fee to exclusive dance clubs oooooooooooooooooo 2000 9400 0 1400
Concert tix&all access pass ooooooooooooooooooooooooo 7000 16400 0 1400
Fancy dinners for two ooooooooooooooooooooooooooooooo 2500 18900 2000 3400
Limo transportation ooooooooooooooooooooooooooooooooo 2100 21000 500 3900
Makeover oooooooooooooooooooooooooooooooooooooooooooo 3000 24000 750 4650
Cash for Clothing "Spending Spree" oooooooooooooooooo 1000 25000 1000 5650
Total for Promo purposes (and IRS Value) = $25,000.
Realcosts - priceline tickets club&concerts free for promotional consideration,
limo owned by company, drivers already on payroll;
makeover - promotional deals
So in reality, the prize promoter advertises a $25,000 prize, IRS requires 15-32%
depending on your existing bracket. Most of the magazine readers are probably between 25-30% or will owe about $6000-$8000 in extra taxes.
No rags-to-riches, no poor, nor even middle class winners (how many want to spend ~$7000 for a shopping jaunt)? If you are already rich and have $7k in pocket change -- sure, but for average folk?
Same thing with the trip-into-space -- sure it's valued at the ticket's "face value", but how much can you get for it on Ebay? IRS claims you have to value donations at market value -- seems like that should apply to prizes too. To make things worse, some prize vendors make the prize non-transferable, "no cash substitution" -- which means you can't get the supposed value, nor can you sell it & transfer it to someone else. Even if you could -- how much do you think you'd get for 1 weeks worth of nights on some arbitrary set of dates at some NYC hotel or the other items. Selling off 1-night club passes? It's a joke.
If someone is paid in 'cash', taxes are unpleasant, but probably as fair as can be under our tax system. But when you have non-cash prizes, or especially prizes that cannot easily be converted to cash, it is very very wrong -- it's discrimination against anyone who isn't "rich enough" to afford the bogusly set taxes.
p.s. table spaces converted to filler to circumvent slashdot prohibition on tables; formatting broken by slashdot disallowing 'fixed font' (adding "ecode" tags caused slashdot to complain of too many junk characters; such intelligent software, allowing well formatted posts...!not!)
I completely agree. I think that the IRS should tax the prize at whatever it the cost to Cisco was. That way it is zero-sum for the IRS... they gain the same amount that they would have if Cisco hadn't run the promo and just kept the money as profit.
That said, I have no idea how the IRS calculated the $25,000 tax bill.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
More to the point, though -- should it be at "Cisco's" cost, or at the "Fair Market Value"? I.e. Suppose Dell offered a 3-year old computer? If it was "brand new", (never been sold), and it cost Dell $3000 to make, and would have resold, 3 years ago for $6000, but on Ebay might only fetch $1000, how much should the prize be "valued".
The cost to the provider isn't the only attribute of value: the prize "owner" may have overpaid for the item, or may have invested poorly and now has surplus stock -- which to "Dell", might be worth $50,000 for a markdown?
How many "prizes" come with a "CarFax" report, or a manufacturer warrantee? Is the new house they gave you on a flood plain?
The idea of the giver arbitrarily setting the price is *way* open to fraud in their favor. The burden of proof would be on the "winner" to prove the object wasn't as valuable as was claimed.
With the trip into space -- say it was valued at $100,000 (with a tax burden of $33,000).
That means the real value of the prize is $100,000-$33,000 or $67,000. The IRS tax burden on winnings should be automatically, by law be subtracted from the value and be the responsibility of the giver, otherwise, winning a "prize" could be a form of punishment in just the headache to dispose of it. *plegh* -- unreasonable IRS.
Didn't I see a guy holding a rabbit hostage and taking paypal donations? he got so much publicity from the stunt that he made savetoby.com into a very valuable domain name. This guy could design a similar stunt around his "I'm going so throw me in jail for taxes" angle
For some reason I refuse to use either spell check or the spacebar properly.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
Supposing your 18% tax bracket is correct, $138,000 / 82% = $168,293. So the folks from the competition / lottery send you a cheque for $30,293 to pay the taxes. The government considers your income to be $168,293, and assesses tax to be $30,293. You endorse the cheque and everyone's happy.
Patrick Doyle
I mod down every jackass who puts his moderation policy in his sig. Oh, wait a sec....
Of course that's not allowed. Otherwise the country would be full of people giving each other hefty discounts on everything to avoid taxes.
Patrick Doyle
I mod down every jackass who puts his moderation policy in his sig. Oh, wait a sec....
Brian Emmett rules- nerdcore baby! Benson Space is going to buy it's rockets from SpaceDev, and here are some more photos and info about spacedev if you care.