Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
The DIY channel has a program, Bath Crashers, wherein people shopping at HomeDepot/Lowes are asked "Do you want to have me make over your bathroom?" These people have not entered a lottery or done anything other than agreeing to have somebody give them something. The something typically is tens of thousands of dollars worth or material and labor. The recipients are required to work and ask friends/neighbors show up and work also.

Had a discussion over the weekend concerning if the people whose houses were worked on would have to pay income taxes on the value of the bathroom remodel. If yes, what would be the taxable amount? (Based on show credits it appears much of the materials are donated by the manufacturer i.e. Toto brand toilets).

Gordon
Atlanta
Print the post Back To Top
No. of Recommendations: 0
The DIY channel has a program, Bath Crashers, wherein people shopping at HomeDepot/Lowes are asked "Do you want to have me make over your bathroom?" These people have not entered a lottery or done anything other than agreeing to have somebody give them something. The something typically is tens of thousands of dollars worth or material and labor. The recipients are required to work and ask friends/neighbors show up and work also.

Had a discussion over the weekend concerning if the people whose houses were worked on would have to pay income taxes on the value of the bathroom remodel. If yes, what would be the taxable amount? (Based on show credits it appears much of the materials are donated by the manufacturer i.e. Toto brand toilets).


Definitely taxable. The taxable amount would be the retail value of the materials plus the value of any labor paid for by one of the companies involved. The value will be reported on a 1099-MISC at year-end. The taxpayer can claim a lesser amount of taxable income if he can demonstrate that the goods and services were worth a lesser amount.

This is no different from winning a vacation on a game show.

Ira
Print the post Back To Top
No. of Recommendations: 0
Definitely taxable. The taxable amount would be the retail value of the materials plus the value of any labor paid for by one of the companies involved. The value will be reported on a 1099-MISC at year-end. The taxpayer can claim a lesser amount of taxable income if he can demonstrate that the goods and services were worth a lesser amount.

This is no different from winning a vacation on a game show.



i'm surprised ..

met a guy in the 70s who won a bunch of stuff on a game show.
the rule then was 'retail value' and he argued that was unfair ..

claimed he was going to court over it arguing for 'market value' ..

his example was a fridge .. he won a fridge but already had a better one and if he sold the prize-fridge he'd barely get enough to cover the taxes

expected the rule would have changed by now (did hear somewhere that most game shows now give you the choice of the prize or a bit of money)
Print the post Back To Top
No. of Recommendations: 4
met a guy in the 70s who won a bunch of stuff on a game show.
the rule then was 'retail value' and he argued that was unfair ..


No, the rule then, as now, was income = Fair Market Value. Then, as now, the prize givers would value it at suggested retail. Then, as now, the recipient could claim a lesser amount if he could show that such amount was Fair Market Value.

Just like Ira said.

Phil
Rule Your Retirement Home Fool
Print the post Back To Top
No. of Recommendations: 0
met a guy in the 70s who won a bunch of stuff on a game show.
the rule then was 'retail value' and he argued that was unfair ..
==============
No, the rule then, as now, was income = Fair Market Value. Then, as now, the prize givers would value it at suggested retail. Then, as now, the recipient could claim a lesser amount if he could show that such amount was Fair Market Value.

Just like Ira said.


oops.... mis-read Ira ..sorry.





... memo to self: "go away" <g>
Print the post Back To Top
No. of Recommendations: 0
If my memory serves me right I believe these shows get around this issue to some extent by having the homeowners lease the shows their homes the week they are doing the home improvements so the lease payment gives the homeowner the cash to pay the taxes on the home improvements received.

Raleigh1208
Print the post Back To Top
No. of Recommendations: 0
How the heck does HGTV give away its annual dream home? They are typically valued north of $1m. So the winner has to come up with more than $350k in federal income tax the year he wins it plus whatever state tax he may be subject to. The average viewer probably can't afford the property taxes on the place anyway and would have to give up his job in order to move to wherever it is. Doesn't make a bit of sense.

--fleg
Print the post Back To Top
No. of Recommendations: 0
fleg9bo: "How the heck does HGTV give away its annual dream home? They are typically valued north of $1m. So the winner has to come up with more than $350k in federal income tax the year he wins it plus whatever state tax he may be subject to."

I have understood that they do a gross-up, with cash, to cover the taxes - (a) value of the house divided by the tax rate less (b) the value of the house is paid in cash.

"The average viewer probably can't afford the property taxes on the place anyway"

Yes.

"and would have to give up his job in order to move to wherever it is. Doesn't make a bit of sense."

I believe that most winners sell them.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 0
How the heck does HGTV give away its annual dream home? They are typically valued north of $1m. So the winner has to come up with more than $350k in federal income tax the year he wins it plus whatever state tax he may be subject to. The average viewer probably can't afford the property taxes on the place anyway and would have to give up his job in order to move to wherever it is. Doesn't make a bit of sense.

--fleg


Most winners probably sell the house and pocket the cash after taxes. Well reported case a few years ago of someone who tried to live in the house. Moved without a job. Owed something like $400K in taxes they couldn't pay. A real financial disaster.
Print the post Back To Top
No. of Recommendations: 4
met a guy in the 70s who won a bunch of stuff on a game show.
the rule then was 'retail value' and he argued that was unfair...


My wife won a car about 5 years ago. We took delivery of it from the dealer and then sold it 3rd party on AutoTrader for about $3000 less than sticker price. However, we received a 1099 for the full sticker price. But the sticker price was not the fair market value.

We filed taxes based upon the fair market price we were paid by the 3rd party; the IRS sent us a mail audit asking why our 1040 did not match the 1099. We responded with a letter and documentation of both the AutoTrader listing and the actual proceeds of the 3rd party sale, arguing that the amount we should be taxed on is the "willing seller, willing buyer" price, not the sticker price.

To our pleasant surprise, the IRS responded that they agreed and our 1040 was accepted.

ETR
Print the post Back To Top
No. of Recommendations: 0
I have understood that they do a gross-up, with cash, to cover the taxes - (a) value of the house divided by the tax rate less (b) the value of the house is paid in cash.

The last house was valued at $1.5 million, and came with $500 thousand in cash for a total of $2 million (plus an SUV). Ignoring the SUV, that comes to 25% in cash which goes a long way to covering the taxes but not all the way.
Print the post Back To Top
No. of Recommendations: 0
The last house was valued at $1.5 million, and came with $500 thousand in cash for a total of $2 million (plus an SUV). Ignoring the SUV, that comes to 25% in cash which goes a long way to covering the taxes but not all the way.

I volunteer to win this year's HGTV Green House and promise to keep it. I'll even give it a good try and will actually enter the contest.
Print the post Back To Top
No. of Recommendations: 1
How the heck does HGTV give away its annual dream home? They are typically valued north of $1m. So the winner has to come up with more than $350k in federal income tax the year he wins it plus whatever state tax he may be subject to. The average viewer probably can't afford the property taxes on the place anyway and would have to give up his job in order to move to wherever it is. Doesn't make a bit of sense.

--fleg


http://contests.about.com/od/taxesfinances/a/hgtvdreamhomtax...

Enter the Dream Home Sweepstakes – But Don't Fixate on the House


A few have gotten into deep trouble by keeping the house. Taxes, real estate taxes, maintainance and falling real estate prices are a trap for the unwary. The other winnings and selling the house for an after tax profit makes winning the sweepstakes viable, even for those who can't keep it.
Print the post Back To Top
No. of Recommendations: 0
I think the house built in/near Kilgore, TX was on lakeside land which was leased for 100 yrs and had a stipulation that its nearby cottage on the lake couldn't even be rented. Those people were toast.

BG
Print the post Back To Top
Advertisement