+ Reply to Thread
Results 1 to 8 of 8

Thread: Reality TV winners get tax reality check

  1. #1
    Don't Panic senrik's Avatar
    Join Date
    Jul 2003
    Location
    Bainbridge Island, WA
    Age
    44
    Posts
    4,165

    Reality TV winners get tax reality check

    Just in time for the Tax man....... kinda makes you wonder how lucky these people really are, doesn't it.

    Comments?

    Reality TV winners get tax reality check
    http://money.cnn.com/2005/04/15/news...ex.htm?cnn=yes
    Having a contractor create your dream home for a television show is great. Then the tax bill comes.
    April 15, 2005: 6:22 PM EDT

    NEW YORK (CNN/Money) - Some reality television winners apparently got a brutal reality check this tax season.

    Daily Variety reported Friday that families featured on the ABC hit show "Extreme Makeover: Home Edition" and Fox's "Renovate My Family" not only are getting their dream homes, but also nightmare tax bills.

    One Illinois husband and wife, according to the entertainment industry publication, discovered it owes $529,000 in taxes after Fox-hired contractors tore down their old house and built a new one with special accommodations for their paralyzed son. The renovation aired on Fox this past summer.

    Unexpected tax bills aren't new for reality TV show contestants who receive cash, merchandise or services. "Survivor" winner Richard Hatch, for instance, is being prosecuted for failing to pay taxes on his $1 million in winnings.

    And in another highly-publicized case, Oprah Winfrey took heat when she gave away free Pontiac G6 cars to 276 members of her daily show audience but didn't cover their tax bills.

    The report in Daily Variety, however, said the belated tax bills are becoming serious problems for winners of home renovation and other wish-fulfillment shows now in vogue.

    "You can ruin someone's life by giving them everything they want," one Hollywood producer told the trade paper. "If you take a log cabin and replace it with a mansion, there are tax consequences to that."

    The tax pain isn't limited to the initial renovation costs. Property taxes, insurance rates and utility bills all could rise too.

    The producers of "Extreme Makeover" try to lower contestants' tax bills by leasing their property during the two-week renovation and filming. Those renovations are then usually tax-exempt.

    Meanwhile, the producers of "Renovate My Family" told Daily Variety that they cover the tax bill for families on their show. They recently offered the Illinois family $215,000 to cover their tax liabilities.

    The family turned them down and now want the Fox show producers to buy the house, the report said.
    "The purpose of the new capitalism is to shoot the wounded." ~ Andy Grove, Chairman, Intel Corporation

  2. #2
    Read The Clue Bearcata's Avatar
    Join Date
    Apr 2004
    Location
    Edge of the Beltway
    Posts
    15,872
    ok need more info. why of course when you improve your home you need a building permit and sometimes the county assessor will come out to see how much the value of your home has increased. But there is something seriously wrong with the amount given on the previous post. We need to know the original value of the home, the assessment of the value of the house and the property tax in the area. Normally, it is something like .50 cents per $100.00 of assessed value of the home. Where I live in the Washington Metro area the assessed property taxes run about $1.16 to $1.49 per $100.00 depending on the county you live in. The housing market is ridiculous here and the assessed value of a home has been going up about $50,000.00 a yr, that increases the taxes about $800 or more a yr, and since property taxes are collected twice a yr thats an extra $1600 (increase over last yrs taxes) that goes to the city coffers.

  3. #3
    The race is back! John's Avatar
    Join Date
    Sep 2002
    Location
    On the mat
    Age
    43
    Posts
    40,432
    Those figures are hugely overstated. I know people in high-tax areas of the country who own houses worth several million dollars, whose annual taxes run around $35k. There's no way in hell that tearing down a house and rebuilding a better house would run anyone $529k, or even $215k, unless they're multiplying their tax liability by the next 100 years of ownership.

  4. #4
    Bitten Critical's Avatar
    Join Date
    Oct 2004
    Location
    Fangtasia - The Bar With Bite
    Age
    45
    Posts
    16,631
    Quote Originally Posted by John
    Those figures are hugely overstated. I know people in high-tax areas of the country who own houses worth several million dollars, whose annual taxes run around $35k. There's no way in hell that tearing down a house and rebuilding a better house would run anyone $529k, or even $215k, unless they're multiplying their tax liability by the next 100 years of ownership.
    John, you're right that those rennovations aren't going to increase the property tax that much. I think the key phrase in that story is "receive cash, merchandise or services." Whenever you win a contest or have gambling winnings, etc. you get a 1099 for the winnings and they count the monetary value as income. I know this because I won a car a few years ago and ended up with @$10,000 worth of extra taxes. My guess is that everything that goes into building the homes is considered "merchandise" and is, therefore, taxable. Maybe even the work on the homes is considered "services." I can only imagine that the value of the work/merchandise/etc. done on those homes is popping the homeowners up into a tax bracket they've never even seen with a telescope. Just my $.02 - I used to work for a tax attorney

    I think this is one of those "be careful what you wish for" kind of situations.
    Anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that 'my ignorance is just as good as your knowledge.' - Isaac Asimov

    I was thinking of the immortal words of Socrates, who said, "... I drank what?"

  5. #5
    The race is back! John's Avatar
    Join Date
    Sep 2002
    Location
    On the mat
    Age
    43
    Posts
    40,432
    That may be possible... but for someone to have a $529k tax liability, even in the 38% tax bracket, they're receiving an unexpected $1.4MM "donation".

    Congrats on winning the car, though

  6. #6
    Read The Clue Bearcata's Avatar
    Join Date
    Apr 2004
    Location
    Edge of the Beltway
    Posts
    15,872
    [QUOTE=Critical] Whenever you win a contest or have gambling winnings, etc. you get a 1099 for the winnings and they count the monetary value as income.QUOTE]

    Ok, now this makes more sense, the IRS is considering this house rebuilding as if the homeowners won a contest or lottery and they have to pay the tax on the prize.

    This is so screwy that most of these people are living at the poverty level, the entire point of the show is to help them and next thing you know the government screws them with a big tax bill. How is this helping any. If the home owners get no tax relief they may end up having to sell their homes to pay the taxes and probably end up living in a worse dump then before.

  7. #7
    Bitten Critical's Avatar
    Join Date
    Oct 2004
    Location
    Fangtasia - The Bar With Bite
    Age
    45
    Posts
    16,631
    Quote Originally Posted by John
    That may be possible... but for someone to have a $529k tax liability, even in the 38% tax bracket, they're receiving an unexpected $1.4MM "donation".

    Congrats on winning the car, though
    Thanks John.

    I worked for a tax attorney at the time, so I knew I'd have to pay taxes on it but I do admit that I was shocked when I went to do my taxes that year and saw how much I was going to owe. It was still way less than the price of the car, so I can't complain too much.
    You're not paying taxes on the value of the prize, you pay taxes on the amount of your income PLUS the prize value. So, whatever your annual taxable income for the year was, you add the value of the prize to that and then pay taxes on that amount. It's MUCH higher than just paying taxes on, say $25,000 (which was the value of my car).

    Quote Originally Posted by Bearcata
    This is so screwy that most of these people are living at the poverty level, the entire point of the show is to help them and next thing you know the government screws them with a big tax bill. How is this helping any. If the home owners get no tax relief they may end up having to sell their homes to pay the taxes and probably end up living in a worse dump then before.
    ITA - it sucks. I think that if ABC actually cared about these families - beyond exploiting their troubles/sick kid/etc. for ratings - they'd come back and take care of the tax bill. I wonder... if someone pays your tax bill is that considered a monetary prize that you have to pay taxes on.....
    Anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that 'my ignorance is just as good as your knowledge.' - Isaac Asimov

    I was thinking of the immortal words of Socrates, who said, "... I drank what?"

  8. #8
    Read The Clue Bearcata's Avatar
    Join Date
    Apr 2004
    Location
    Edge of the Beltway
    Posts
    15,872
    [QUOTE=Critical]Thanks John.

    You're not paying taxes on the value of the prize, you pay taxes on the amount of your income PLUS the prize value. So, whatever your annual taxable income for the year was, you add the value of the prize to that and then pay taxes on that amount. It's MUCH higher than just paying taxes on, say $25,000 (which was the value of my car).
    [QUOTE=Critical]

    Thing is I remember when I took accounting 101 way back there is something called income averaging. In case you have an unexpected winfall and your income is very high one year you can average it over a 5 yr period and the tax is much lower. I don't know if they closed that. Its been awhile since I took that class but I definitely would take my taxes to an accountant and have them figure something like this out.

    There is another problem. When you win something, for example in a casino you have to fill out paperwork to the IRS there if it is over a certain amount. I wonder if part of the problem with this show is that they have the IRS immediately send this poor folks a tax bill and that if they don't pay it immediately they may end up with penalties and jail time???

+ Reply to Thread

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts

SEO by vBSEO 3.6.0 ©2011, Crawlability, Inc.