Posted on 07/05/2002 8:52:50 PM PDT by chance33_98
Man Wins Free Dream Home, Can't Afford Sales Tax Winner Hopes To At Least Spend A Week In Home
POSTED: 11:22 a.m. EDT July 5, 2002
SHERWOOD, Md. -- There's no such thing as a free lunch or a free house.
That's what Milton O'Bryant is learning. He's won $1 million designer beach house on the Maryland shore, in a promotion for the House and Garden TV cable channel. But while the house hasn't cost him a cent, O'Bryant owes taxes on his lucky break.
He said he would have to take out a $500,000 mortgage just to pay the state and federal tax bills. Instead, the Texas police supervisor will put the dream home up for sale.
O'Bryant hopes his family will at least spend a vacation week in the house before the new owner takes over.
I could probably keep a TV show longer too. :)
Depends on where you live. The top federal income tax rate is 38.6% now, although some income around the 300K range (if you are single) is effectively taxed at a slightly higher rate due to phasing out of deductions.
If you are fortunate to live in a state with no income tax (like Texas), you are looking at a maximum bite of about 40%.
I'll wear HOP's inmate garb.
Maryland may have "deed stamps" you must purchase based on the dollar amount of the real estate when the deed is transferred at the Register of Deeds' office. Sales tax with a different name. It's still sales tax.
Beginning the day that the title is transferred taxes will be due for the amount of time the "winner" owns the home until he sells it. That too could be a few more thousand it cost to win this "prize". Especially if it doesn't move in a very few weeks.
How much will he pay in fees? Accountant, lawyer, grass mowing, somebody to check for break-in, utilities, insurance, on and on. Really more taxes in themselves because you are pretty well forced into these expenses.
How much in penalties will he pay if he doesn't have the tax money now?
He may well have to reduce the price to remove this albatross from his neck. That cuts dollar for dollar from his taxed winnings. Depends on million dollar home market and luck in finding a sucker.
HGTV did sort of warn people who entered. But the only people who could afford to win the home were probably extremely small in the number of entrants. When it is all taken care of I'll bet this family won't even buy a volunteer fire department raffle ticket for fear of winning.
Not when some 20 yo journalism student writes the headline.
Yes, but only at the excise tax rate (just under 2%) rather than the more onerous sales tax rate of nearly 8% (depending on where you are). Still, a million dollar home would result in nearly $20,000 in tax, however, the tax is customarily paid by the seller in real estate transactions. Also, no state income tax here, this winner would only have the federal income tax burden to worry about.
Still, if the home was really worth a million dollars, and it took half a million to pay the state and federal income taxes, I cannot imagine a lender not being willing to lend 50% of the home's value, no matter what the ability of the borrower to repay. The payments would be pretty steep, but chances are good that the home could be rented out for a period of years, until the winner's income caught up to the ability to make the payments. Just depreciating a house that expensive would generate some tax breaks to offset some ordinary income. This winner needs to see a good CPA.
and the seller normally pays. I took quite a beating when I sold my home in Vancouver, Washington last year. Fortunately, I sold just before the market dived, or it would have been even worse.
But wait, you must be mistaken, that goes against the GOP grain of "the consumer always pays".
I'm sure there'll be a GOP spokesperson along any minute with a clear explanation of the error you made.
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