It's treated as ordinary income, and yes the recipients are responsible for paying the taxes on this. For many this can be a real killer, financially, and they have to sell their "winnings" in order to afford to pay the taxes.

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Xoutpost.com - where you come for the information but stay for the friendships

Sounds like a gift with a real kick...

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2010 528Xi
I demand justice.
Or, if there must be injustice, let it be in my favor.

Reynold's Wrap: it's not just for hats anymore.

Let's put it this way, if you won a gift of $100,000, and have to pay taxes of $40,000, and you refused the gift, you would have thrown $60,000 away. I would gladly accept it, sell it and pay the taxes

Taxes makes the goverment run.

We need the goverment to maintain and build the roads we drive our X5 's
on.

No goverment no country, therefore taxes as much as we hate them are good.

Yeah, I know, I didn't mean it in quite that way!

I meant a (hypothetical) situation where one would be burdened beyond their ability to pay.

P.S. Anyone out there that wins the lottery, and doesn't want to pay their taxes, just send me the check, and I'll pay them!

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2010 528Xi
I demand justice.
Or, if there must be injustice, let it be in my favor.

Reynold's Wrap: it's not just for hats anymore.

Here's where things get interesting...

I'm in the military, and I hate taxes. Talk about cutting off one's nose to spite one's face!

I know we need taxes and government, and I'm not arguing that we don't, I'd just like to see both be (much) smaller...

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2010 528Xi
I demand justice.
Or, if there must be injustice, let it be in my favor.

Reynold's Wrap: it's not just for hats anymore.

I hate taxes as well.

We all want to be free and not burden by taxes.

I was involved last year in a local taping of "Extreme Home Makeover." Long story short, I was called onto the set to provide chiropractic care to some of the cast, crew and staff on the site.

I actually had the same question and the story I heard goes something like this: The house and all materials/labor are donated. Sponsoring mortgage companies, banks, etc. also donate money to an escrow account that go towards paying property taxes, utilities, etc. for a certain amount of time. The fund has enough to cover these things plus "extra" for the income taxes the new owners would be liable for. To rephrase what AutoXer had said, If you got $100k and got to keep $60k of it, you still came out ahead.

Don't forget that these houses are turnkey. No taxes, utilities or mortgages to pay. They even get vehicles and tons of craftsmen tools from Sears for free. All they really have to pay for is food.

I can't agree with you more! Don't even get me started on taxes! It's just crazy how much we have to pay!