How can I reduce taxes on my winnings?
May 9, 2005
Subject: Query for California tax related services
From: Erik
Date: Tue, 26 Apr 2005
I won a vehicle in an online contest, which I will receive later this year. The amount to reported on Form 1099 MISC will be the invoice price for the vehicle, which is more than I can sell it for. I will also receive some cash, but not enough to pay the taxes.
As I understand it, as an individual, I can't let a loss on the sale offset the gain reported on Form 1099 MISC. Can I create a business for this one transaction?
Answer
Date: Mon, 02 May 2005
Hello Erik,
No. In order to have a business selling vehicles, you would need to be licensed by the Department of Motor Vehicles.
First, ask if you can receive a cash settlement instead of the car, since you don't want it.
Alternatively, it would be simpler to just challenge the value reported on Form 1099 MISC. Use the Kelly Blue Book to determine the cost for the car and add a profit that you could expect if you negotiated the purchase of the car. You can also pay to have the car appraised. Then disclose why you are reporting a different amount of income from the amount reported on Form 1099 MISC.
Good luck!
Mike Gray
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