Posted by Jim Lindgren: CNBC stock contest: Is winning a weekly prize worse than losing? http://volokh.com/archives/archive_2008_05_04-2008_05_10.shtml#1210466929
If it�s late spring, it�s time once again for the CNBC stock trading challenge. First prize is $500,000 and the runner-up wins $250,000. Even after taxes, that's a lot of money. But the non-cash weekly prizes carry such a hefty income tax liability that I don�t think I�d want to win most of them. If you are in a combined 37% federal and state income tax marginal tax bracket, in week 8 you could win 2 nights in a Bentley (with chauffeur) and pay only $3,700 in income taxes on a prize that retails for $10,000. Because I could rent an ordinary luxury car without a chaffeur for a couple nights for a few hundred dollars, something I'm not inclined to do in any event, I can't imagine why I'd want to rent a Bentley for a couple thousand dollars, the amount of taxes I would have to pay if I won a free prize. Or you could win week 4�s prize of a private jet to Jamaica for a 3-night vacation for only $12,000 in taxes. Because one can be a guest in many of the world�s best hotels for under a $1,000 a night, spending $12,000 on a three-night vacation seems like a lot to spend for a �free� vacation � one that comes complete with a 1099 showing income of $32,500. What do families do when they win a new house on Extreme Makeover: Home Edition? The producers of that show must pay a mint to build a house in a week; I wonder how generously those houses are valued on 1099s.
_______________________________________________ Volokh mailing list [email protected] http://lists.powerblogs.com/cgi-bin/mailman/listinfo/volokh
