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The Catch With Winning A Free House

My friend that won the house ran into one problem with her great score!  

Big time taxes

Taxes!!!

The $200,000 that my friend won in the post “My friend won a house“, had the taxman at her door wanting his fair share!  

Luckily my friend “Sis” wasn’t making as much money as she does now.  But still the capital gains on $200,000 is quite substantial.  I’m not privy to the actual tax amount she paid, but from what I read it would have been taxed as if it were regular federal income tax rate, and then the state tax rates too…  So I’m sure it turned out to be a pretty penny, but not 50% like I’ve heard in the past.  

(Check out this funny and informational post by www.bargaineering.com: “Prize Winnings Tax” ) 

So how did she pay for the winnings?  

To start, she sold the new car that was part of the prize package (it was a hyundai).  Next she sold some of the gift certificates to friends.  She used some of the money that she had in savings, but I doubt that was enough either.  I’m guessing that she probably borrowed the rest from her parents.  I do know that she was pretty stressed out coming up with the money for the taxes.  

So I started wondering what would I do in her case?  

  • First, I’d have to liquidate all of my regular stock account holdings.
  • then I’d have to take a $50,000 loan against my 401(k).
  • I would expect that should do it, but if it didn’t, then I’d also take a home equity loan against the house I just won :(.

I guess in this case, every silver lining has it cloud.  ;)  

But hey, it’s still good!

My Close Friend Won A House

A few years back, my best friend’s sister (my close friend too, let’s call her Sis) won a new house (a townhouse), car, and other prizes that added up to a tune of about $200,000. What is her secret? Sis (and her boyfriend) filled out 50 postcards and snail mailed them to a radio show contest.  At theContinue Reading