Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Posted by taxguru on January 17, 2004

Some lottery winners challenge IRS, tax court rulings – Lottery winners have been selling their future payment streams to investors and trying to claim the income as long term capital gains, which are subject to lower tax rates than the ordinary income tax rates that would apply to regular lottery income. IRS and the Tax Court are claiming that such sales should be taxed in the same manner as the regular payments would be. As with most tax issue, it is extremely expensive tax-wise to receive too much income in a single year because it pushes the recipient into the higher brackets than if the income were spread out over several years. Up until 1986, we had a mechanism to alleviate some of the damage from a big spike in income. However, our rulers in DC decided that income averaging was saving people too much money, so they eliminated it for everyone except farmers.

IRS to Audit Nature Conservancy From Inside – As with most huge bloated charities, there are plenty of opportunities for funny business and conflicts of interest. As I’ve always said, if you truly want to support very helpful charitable causes, it’s best to give directly to the small groups who do the actual work and not to the big guys who use most of the money for their humongous overhead. For fans of big cats, my favorite is still Turpentine Creek Wildlife Refuge, South of Eureka Springs, Arkansas. Every dime they receive is used to care for the animals they have saved.

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