The good news: There was no Mayan apocalypse.
The bad news: You didn’t win the Powerball.
This past year will undoubtedly be remembered for several important events – the Supreme Court’s decision upholding Obamacare, the London Olympics and the reelection of President Obama – to name a few. A recent article by The Estate Analyst, “The Year in Review – 2012: A Retrospective of the Whole Shebang,” provides a somewhat comedic overview of this year’s Supreme Court rulings, Tax Court cases, celebrity estates, and other interesting events.
One notable tax decision involved the Alabama Waffle House waitress who was given a lottery ticket worth $10 million from a customer. The waitress, her parents, and her siblings set up a corporation, which eventually claimed the winning ticket and elected to receive annual payments of $354,000 for 30 years.
Not surprisingly, other Waffle House employees claimed they were entitled to a share of the winnings because all tips were to be shared. The IRS also claimed its share by finding that the waitress had made a taxable gift by sharing the lottery ticket with her family.
In Dickerson v. Commissioner, T.C. Memo 2012-60 (March 6, 2012), the Tax Court decided that: (1) the customer who gave the waitress the lottery ticket did not make a taxable gift; (2) the waitress’s former Waffle House co-workers were not entitled to any share of the lottery ticket – which was a gift to the waitress and not a tip; and (3) the waitress’s long-standing family agreement to share tickets was not binding, so a taxable gift of 51% of the lottery ticket was made with a value of $1.1 million. A gift tax delinquency of $771,000 was owed with interest and penalties.
To read about the other tax, charitable and estate planning blunders of 2012, be sure to check out this article.
Reference: The Estate Analyst (December 2012) “The Year in Review – 2012: A Retrospective of the Whole Shebang”