Neal Wanless, a 23 yo rancher from S.D. just won 232 million in the Powerball lottery. The newspaper reported that he'll take a lump sum of 88 million after taxes. That equates to a tax rate of about 62 percent! Is there some sort of windfall penalty that results in a 62 percent tax rate? That tax rate is about what most Europeans pay (and get cradle to grave health care, free education and more).

The value of a lottery winning is generally posted as if the winning were to occur with annual payments over a 30 year period. When the winning is taken as a lump sum payment the value is reduced to reflect this method. The taxes are then paid on that winning which results in the final listed value.
The calculation of the tax rate in the previous posting is inaccurate.

Originally Posted by Hadleyite

The value of a lottery winning is generally posted as if the winning were to occur with annual payments over a 30 year period. When the winning is taken as a lump sum payment the value is reduced to reflect this method. The taxes are then paid on that winning which results in the final listed value.
The calculation of the tax rate in the previous posting is inaccurate.

Spot on! If a single payment, the taxes are based on the cost of the annuity the lottery would buy to provide a XX-year payment schedule of $___ per year.

Originally Posted by Hadleyite

The value of a lottery winning is generally posted as if the winning were to occur with annual payments over a 30 year period. When the winning is taken as a lump sum payment the value is reduced to reflect this method. The taxes are then paid on that winning which results in the final listed value.
The calculation of the tax rate in the previous posting is inaccurate.

Think of it as the total payout of a 30 year Fixed Immediate Annuity(SPIA), compared to the purchase price of the annuity.

And if I'm not wrong, no matter where he puts that many, except maybe if he got real cold cash, that money will continue to get beat-up with taxes.

Keedy

my question refers to Keedy's comment. Once a lottery winner takes the money in a lump sum and pays the taxes...is he/she taxed on that money every year thereafter too?

He would only have to pay taxes in the following years on the interest he receives from his investments. How if he puts the money in coffee cans he pays no taxes.

It would be a hard call as to where to put that much money but I bet there are thousands of hungry money managers wanting a piece of that action.

At the rate the economy is going...he better start drinking alot of coffee!!!!

Originally Posted by meriboo

At the rate the economy is going...he better start drinking alot of coffee!!!!

With inflation rearing it's ugly head...he may need to invest in a wheelbarrow to purchase a loaf of bread.


Keedy

Either way, is there anyone who wouldn't want to be in that "tax" position.

I predict that the price of a gallon of gas will soar to over $4.00 a gallon in the very near future. That will mean that prices on goods will have to rise, also. That will mean that your dollar won't go as far so you have inflation.
We voted for change...and were going to get it.

Keedy

about those taxes???

I have always thought that if winnings like that should come my way, I would grab a really good attorney and a really good accountant and set up a blind trust, or whatever it is called, to receive those winnings. But I have to wonder if that is not done because the lottery commission does not allow it because the lottery wants and needs the associated publicity or because most people want everybody to know (I sure wouldn't) or because most people don't think about such a thing or because taxes on trusts are especially wicked.

Don't know the answer. It might be all of the above. But I do not think I will ever need to know the answer.

Boomer

Sounds like too many headaches to me. Glad I never won the lottery.

My father had what he thought the perfect lottery formula was:

1. Verify the numbers
2. Go to Tallahassee to collect the money
3. Change your name (to heck with mooching relatives!)
4. Abandon the stuff you had, house and furnishing included
5. Move somewhere else and buy everything new (let them try to find you!)

Unfortunately, he never got to work the plan....

Originally Posted by Keedy

I predict that the price of a gallon of gas will soar to over $4.00 a gallon in the very near future. That will mean that prices on goods will have to rise, also. That will mean that your dollar won't go as far so you have inflation.
We voted for change...and were going to get it.

Keedy

It has already been to over $4 a gallon, remember.... a year ago?