But why not just auction it off again, say for $5/ticket. You'd clear your taxes due, easily.
Well, first of all, you’d end up without a house. Second, the federal income tax and medicare tax would be over 40%, or close to $1.3 million.
If you win a normal lottery, at least you are getting cash, so you can take half of what you get and pay the taxes. Why government should get half your winninngs when they didn’t pay for half the ticket is a question for the ages.
But when you win property, unless you are independently wealthy, you almost always have to sell it off to afford the taxes on your winnings.