Regrettably, you did not win the $587.5 million Powerball lottery. And, although you survived the Mayan apocalypse, this is no time to relax. We have segued right over the “fiscal cliff” and into the new economic reality zone.
The year 2012 will be remembered for several important events, like the Supreme Court’s Obamacare decision, the London Olympics, and the reelection of President Obama. In recapping this year’s Supreme Court rulings, Tax Court cases, celebrity estates, and other interesting events, The Estate Analyst took a light-hearted approach in reviewing 2012 in: “The Year in Review – 2012: A Retrospective of the Whole Shebang”.
One notable tax decision involved an Alabama Waffle House waitress who was given a lottery ticket by a customer back in 1999, that turned out to be worth $10 million. The waitress, her parents, and her siblings set up a corporation, which eventually claimed the winning ticket and elected to receive annual payments of $354,000 for 30 years.
Of course, her fellow Waffle House employees claimed during a decade of litigation that they were entitled to a portion of the winnings as part of a “tip-splitting” arrangement. According to the court, however, they were not. On the other hand, the IRS was successful in claiming its share, by finding that the waitress had made a taxable gift by sharing the lottery ticket with her family.
In its opinion, titled Dickerson v. Commissioner, T.C. Memo 2012-60 (March 6, 2012), the Tax Court decided that: (1) the customer who gave the waitress the lottery ticket did not make a taxable gift; (2) the waitress’s former Waffle House co-workers were not entitled to any share of the lottery ticket – which was a gift to the waitress and not a tip; and (3) the waitress’s long-standing family agreement to share tickets was not binding, so a taxable gift of 51% of the lottery ticket was made with a value of $1.1 million. A gift tax delinquency of $771,000 was owed with interest and penalties.