topic If you win the house that is 750000 value and you pay the 25% gambling tax on it, then sell the house for less than 750000 do you have to pay taxes on the sale? in Deductions & credits

If you win the house that is 750000 value and you pay the 25% gambling tax on it, then sell the house for less than 750000 do you have to pay taxes on the sale?

besatt01 — Tue, 29 Oct 2019 02:03:20 GMT

Re: If you win the house that is 750000 value and you pay the 25% gambling tax on it, then sell the house for less than 750000 do you have to pay taxes on the sale?

Anonymous — Tue, 29 Oct 2019 07:38:05 GMT

no your basis becomes $750,000. was the house used for anything before sale - rental, personal residence?

Re: If you win the house that is 750000 value and you pay the 25% gambling tax on it, then sell the house for less than 750000 do you have to pay taxes on the sale?

Hal_Al — Wed, 30 Oct 2019 14:32:04 GMT

No. Your cost basis is $750,000, because you paid income tax* on that amount. If you sell for less, you will have a capital loss not a taxable gain. Depending on how you used the property, you may even have a deductible loss**.

* I assume by "gambling tax", you paid 25% federal income tax , through withholding or some other way. You report the $750,000 prize as income on your tax return and then claim the 25% withholding as a credit.

**If you used the property for personal use (home or 2nd home, including letting friends or relative live there), you may not deduct the loss. If it was treated as investment property (no personal use), you may deduct the loss.

Re: If you win the house that is 750000 value and you pay the 25% gambling tax on it, then sell the house for less than 750000 do you have to pay taxes on the sale?

pk — Thu, 31 Oct 2019 03:48:48 GMT

@besatt01 agreeing with @Hal_Al as to the tax treatment of the sale of a gambling win and disposition thereof, pending I would like to make a few small points -- (a) these are two separate transactions --- for the investment cost of the lottery ticket(s) you gained an asset with an FMV ( not value as declared in the promotional literature ) of $XXXX --- thus you pay taxes on this income; (b) when you dispose of the asset to a non-relative ( i.e. an arms length transaction, assumed to be at FMV ) for $YYYY, your cost basis for purposes of gain/loss computation is $XXXX plus cost of any improvements LESS any allowable depreciation.; (c) you are taxed on any gain at your marginal rate or capital gains rate while losses are generally not recognized unless the asset was used for income generation. This is substantially the same as @Hal_Al reply except I am drawing attention to FMV at acquisition ( not advertised "value) and FMV at disposition.