You won a sevenday allexpense paid vacation in a raffle draw

You won a seven-day all-expense paid vacation in a raffle drawing conducted by a community organization. Do you have to pay federal income taxes on this prize? How would you find out the value of this prize? Does the organization have to do anything other than hand you the vacation tickets? Defend your answer. It is unclear if you are an employee or just a person who interacts with the organization. Does it even make a differnce whether the winner of the vacation is employeed by the organization or not?

Solution

Yes, I have to pay federal income tax on the prize money earned. Value of the prize shall be determined based upon the fair market value of the same Yes, organization have to determine if I am u US citizen or not. If I am not then 30% tax is to be withheld but if I am then no such condition is to be honored. Further, Where the prize money exceeds $600.00, the organization awarding the prize must file a 1099-Misc to report the award to the IRS. Yes, it makes a difference because if the prize money winner is an employee of the organization, prize winnings are reported on the employee\'s W-2