Regrettably, you did not win the $587.5 million Powerball lottery. And, although you survived the Mayan apocalypse, this is no time to relax. We have segued right over the “fiscal cliff” and into the new economic reality zone.
This past year will undeniably be remembered for several important events, such as the Supreme Court’s decision upholding Obamacare, the London Olympics and the reelection of President Obama. In order to recap this year’s Supreme Court rulings, Tax Court cases, celebrity estates, and other interesting events, a recent article, “The Year in Review – 2012: A Retrospective of the Whole Shebang” by The Estate Analyst, took a comedic approach to what has passed in 2012.
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.
Be sure to explore the above-mentioned article to review other tax, charitable and estate planning missteps of 2012.
Reference: The Estate Analyst (December 2012) “The Year in Review – 2012: A Retrospective of the Whole Shebang”