April 3, 2011

Winners & Winners, Losers & Losers

Last week, an office lottery ticket won for half a dozen New York IT workers -  a nice $319 million, before tax (unlike here, dumb luck is taxed in the US).

While Mike Barth was waiting in line to buy the winning ticket, he had an attack of the munchies, and grabbed himself a Snickers bar, a sweet and salty treat.  In that moment, an ill mannered fellow ticket buyer sneaked in ahead of Barth, thereby becoming the owner of a losing ticket.

But that's not all, the six happy workers should have been seven, but one of their brethren "wasn't feeling lucky", so opted out of putting in for the weekly office syndicate.  That decision cost him $16 million (post tax). 

3 comments:

  1. geoff2:34 PM

    Fluke windfall gains have never been taxed in Australia. Even when the capital gains tax was introduced in 1985, lottery wins and the like were specifically excluded by the legislation.

    No one questioned the logic of this at the time. To tax these as capital gains by definition would have logically required an allowable capital deduction for the cost of lottery and betting tickets. No one wanted that.

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  2. geoff2:50 PM

    For the same reason motor vehicles were specifically excluded by the CGT laws. Not many people know this but to this day if you buy and sell a car privately and make a profit, then the profit is tax free.

    The reason of course is obvious. If you buy and sell a car privately, you are far more likely to make a loss. Far far more likely. To tax the profit you must also allow the loss. Otherwise it is no longer a capital gains tax.

    I have no direct knowledge but I suspect this little quirk in the tax law has helped the vintage and classic car market over the years. It may even have helped the popularity of these cars. There seems to be more of them about.

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  3. Geoff - fascinating, I never knew that about motor vehicles, and had never thought through why gambling winnings are not taxed (obvious, but had never thought about it).

    Although, other countries do tax winnings, so I'd assume their laws are different in regard to corresponding losses. More likely, they have specific laws so as to tax winnings in isolation of anything else.

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