Uncle Sam spoils dream trip to space

[vidcc]

Getting lucky in the USA is costly, never enter a competition unless you could afford to buy the prize in the first place

LOS ANGELES, California (AP) -- Brian Emmett's childhood fantasy came true when he won a free trip to outer space.

But the 31-year-old was crushed when he had to cancel his reservation because of Uncle Sam.

Emmett won his ticket to the stars in a 2005 sweepstakes by Oracle Corp., in which he answered a series of online questions on Java computer code.

He became an instant celebrity, giving media interviews and appearing on stage at Oracle's trade show.

For the self-described space buff who has attended space camp and watched shuttle launches from Kennedy Space Center, it seemed like a chance to become an astronaut on a dime.

Then reality hit. After some number-crunching, Emmett realized he would have to report the $138,000 galactic joy ride as income and owe $25,000 in taxes.

Unwilling to sink into debt, the software consultant from the San Francisco Bay area gave up his seat.

"There was definitely a period of mourning. I was totally crestfallen," Emmett said. "Everything you had hoped for as a kid sort of evaporates in front of you."

With commercial spaceships still under development, it's uncertain when the infant space tourism industry will actually get off the ground.

Still, ultra-rich thrill-seekers are already plunking down big -- though refundable -- deposits to experience a few minutes of weightlessness 60 miles above Earth.
A visit to the stars for a black hole in the wallet

And in recent years, space tourism companies have teamed with major corporations to stage contests with future suborbital spaceflights as the grand prize.

The partnerships have interstellar hype -- but as Emmett found out, they can get mired in that most earthbound hassle: taxes.

"From a consumer perspective ... I'd be wary," said Kathleen Allen, director of the University of Southern California's Marshall Center for Technology Commercialization. "I'd check to see the fine print."

Since the Internal Revenue Service requires winnings from lottery drawings, TV game shows and other contests to be reported as taxable income, tax experts contend there's no such thing as a free spaceflight. Some contest sponsors provide a check to cover taxes, but that income is also taxable.

"I don't see how an average person can swing that kind of tax payment. It's a big, big bite," said tax attorney Donna LeValley, contributing editor for J.K. Lasser's annual tax guide.

To reduce the financial burden, winners can argue that they don't owe any taxes until their flight lifts off. Another option is working out an installment plan to pay taxes over time, said Greg Jenner of the American Bar Association.

The IRS declined to comment, saying it does not talk about individual matters.

Despite Emmett's cancellation, Oracle said its contest was a success. The software giant is in the process of naming his replacement and still has two other winners on board from Asia and Europe.

That spaceflight will be provided by Space Adventures Ltd., the same company that brokers deals for trips on Russian rockets to the orbiting international space station for a reported $20 million per customer.

Eric Anderson, the company's chief executive, insists that contests are the best way for most people to get into space. He said Space Adventures has given away about 20 reservations through competitions, and the majority of winners are satisfied.

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[Ava Estelle]

The same thing happened with audience members of the Oprah Winfrey show who were given cars, they each had to pay the IRS thousands of dollars for them.

The most trajic case was when she tried to give a desperately poor woman a house and furniture for her and her kids, the IRS insisted on tens of thousands of dollars tax, and said that if anyone paid the tax the woman would be liable for that too.

[Busyman™]

Uhhhhh so what?

This is not new.

HGTV gives away a dream house every year. Almost no one can afford to keep the house due to the taxes.

Again, this is not new. This is not even news.

[Barbarossa]

Is it just the U.S. that has these laws, or is this the case in the U.K. as well?

For example, do the winners on Deal or No Deal have to pay taxes on their winnings?

I honestly don't know.

[Busyman™]

The same thing happened with audience members of the Oprah Winfrey show who were given cars, they each had to pay the IRS thousands of dollars for them.

The most trajic case was when she tried to give a desperately poor woman a house and furniture for her and her kids, the IRS insisted on tens of thousands of dollars tax, and said that if anyone paid the tax the woman would be liable for that too.

I wonder what happens with Extreme Makeover: Home Edition?

Also if I was given a car and told I had to pay the tax on it, so be it. Those Pontiacs Oprah gave away probably only had about $2000 of tax on it.

[Busyman™]

Is it just the U.S. that has these laws, or is this the case in the U.K. as well?

For example, do the winners on Deal or No Deal have to pay taxes on their winnings?

I honestly don't know.

I would just be surprised if someone thinks this is new here. I thought everyone knew that if you hit the lottery that gubment would gut your winnings.

Hell our Powerball was at $250 mil (Beckham's entire contract) the other day but I'm sure no one thinks that if they win, they keep all of it.

[Barbarossa]

Just done some research, and it seems that our National Lottery is exempt from Capital Gains Tax, as are the Football Pools, Premium Bonds, and betting in general, really.

So I'm assuming TV gameshow winnings are too

[Barbarossa]

Back on topic, if someone offered me a trip to space for $25,000 there is no way in the world I would turn it down.

You could sell your story to the newspapers for 10 times that amount. At least.

You could also get sponsorship from companies, and advertising, you'd be famous ffs. You could make millions from it.

That guy is a complete fool

[Ava Estelle]

Also if I was given a car and told I had to pay the tax on it, so be it. Those Pontiacs Oprah gave away probably only had about $2000 of tax on it.

It had nothing to do with the car, it counted as income, and the amount payable was dependent on their tax bracket and how much they had earned in that financial year. For some it was over $7,000.

[manker]

Just done some research, and it seems that our National Lottery is exempt from Capital Gains Tax, as are the Football Pools, Premium Bonds, and betting in general, really.

So I'm assuming TV gameshow winnings are too

Yep, that's right. In the UK there isn't any tax on winnings. Unless youre a bookmaker.

From what I remember, there used to be a system in the UK where 10% tax was paid on either the stake (before the outcome was known) or the winings. If you didn't pay tax on the stake and didn't win, you weren't liable for it retrospectively. I think it must have been the Labour government who did away with that when they got into power in 1997, it seems like something they would do.


I think US citizens get a rough deal in this because taxation on winnings is essentially an extra tax on the poor.