Dimes to Dollars- a military wife's guide to personal finance: Good deal? Guess again

Saturday, April 21, 2007

 

Good deal? Guess again

I'm not sure if you've seen one of these before, but in Norfolk, VA, they just had a home raffle, and the winner was a woman from Richmond, VA. Anyway, tickets were $100 apiece, and the home up for grabs was a 3-bedroom, 2500 square foot home valued at $700,000. The home was made of donated materials and labor, and the tickets were sold as fundraisers for St. Jude Children's Research Hospital.
For a mere $100, you could have a new house valued at $700,000. Would you buy a ticket?

Would I buy a ticket? Hell no. I'd contribute to St. Jude but I couldn't take a risk of winning the house. If you were to win, do you know what will be coming in the mail in January, courtesy of St. Jude? A 1099. Yes, the house is considered a prize, so you owe income tax on it. Yes, that little $100 winning raffle ticket would increase your 2007 income by $700,000. Yeouch. We're talking a tax liability of around $230K. How's that for a good deal? You'd probably have to take out a quarter-million dollar bank note just to pay the tax bill, or hurry up and try to sell the house in order to do the same. Of course, if you sell the house, and there are any gains, you'd have to pay tax on those as well.

All things considered, I'd rather play the lottery. At least if you win, the payment is in cash.

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