Turns Out Oprah's "Free" Car Giveaway Wasn't So "Free"

[matcom]

<snip>

Oprah called the show part of her "wildest dreams" season.

But for many of the 276 recipients of the new Pontiac cars that the talk-show queen gave away last week, there was a bit of reality to come with that dream -- they are going to have to fork over thousands of dollars in taxes.

It turns out that free car wasn't so free.

That's because while Pontiac agreed to pay for most of the local charges -- things like state sales tax and licensing fees -- the recipients have to report the cars as income once tax time comes.

By adding $28,500 to someone's income, it can push them into a higher tax bracket -- which means they will have to pay about 25 percent or more of the car's value in taxes. And for a nearly $30,000 car, that probably means, for most of the recipients, shelling out $7,125 for the "free car."

And if you live in Illinois, you can expect to tack on another 3 percent or so in state income taxes

http://www.suntimes.com/output/news/cst-nws-oprah22.html

[joeybee12]

1. That publicity seeking b-ea-tch!!!!

As soon as I heard she'd done that I thought, ah, Nielsen time!

[mrboba1]

2. Did they not know that was coming?

How out of it do you have to be to not know that?

:shrug:

[ProdigalJunkMail]

5. insanely rich talk show hosts

just might be out-of-it enough to not really understand that gifts of this nature are income...or not be aware that to some folk (heck MOST folks) $7000 is not just pocket change...

theProdigal

[mrboba1]

8. that's true - but I would think someone on her show

would have known and told her so...

[ProdigalJunkMail]

11. i am sure SOMEONE thought of it

but as a ratings-buster...it was just too good for Oprah to pass up. The amount of headache it would cause for the recipients was not understood or cared about probably because of being out of touch with reality down on the ground.

Note : I am not saying Oprah is a bad person or stupid or anything of that sort. It is just the nature of her business and her fortune that could have caused all of this...and then again, I could be an out of touch idiot myself

theProdigal

[SaintLouisBlues]

25. Misleading article

snip: "It turns out that free car wasn't so free."

I happen to know that the tax implications were explained to everyone individually right after the show. No "it turns out". Accept the $28K Pontiac and pay income taxes, or get nothing.

Obviously, everyone took the car.

[flamingyouth]

24. Apparently pretty out of it

:D

[livinginphotographs]

3. My girlfriend was watching it that day....

And was gushing over how generous Oprah was. I said, "Just wait until they have to pay the taxes on those cars."

I just might send her an I-told-you-so email with that article.

[underpants]

4. Same applies for "Complete home make over"

My wife and I talked about this as soon as we heard about the car give-away.

[mrboba1]

9. Do you mean in terms of income?

Or just property assessment? I wouldn't think they could quantify it for income, but definitely for property taxes...

[underpants]

13. Property assessment and gift tax

There was an article about months ago in NEwsweek (I think) the producers are trying to get around it by renting the house for the days they are fixing it but no tax experts they talked to thought it would hold up.

[miss_kitty]

27. it's income. n/t

[terrya]

14. I always wondered about those makeovers on "Queer Eye"...

I mean, that stuff (the wardrobe, the interior design stuff) isn't cheap, that's for sure. I'm sure thousands of dollars are spent...and how much of that does the person getting the makeover have to shell out in taxes.

[underpants]

18. Actually those are pretty safe

The Queer Eye ones. The limit is about $50K for some of the taxes kicking in, furniture isn't taxed as far as I know.

[bloom]

6. That is how it is with any "gift"

They would have to give them quite a bit of cash to compensate for the taxes over the taxes because then the people would be taxed on THAT.

The people could always sell the car.... and come out somewhat ahead.

[miss_kitty]

28. if the money is directly paid to the taxman by the giver

then it's not considered income of the person upon whose behalf it is paid.

that's my understanding of it...

[truhavoc]

7. My father was on a Lottery show in Ohio where he won a new Honda Accord

and 4,800 in cash. By the time taxes came around he had to use the money he won (4,800) to pay for a portion of the taxes and earlier he decided to not accept the car, taking what the dealership would give him for it. Appearently once a car is in someone's name it can never be a "NEW" car again. It was nice to get the money out of the car, but by no means was it the deal it was meant to be.

[noonwitch]

10. I'd rather be there for her "favorite things" giveaway

I don't think you have to declare cashmere sweaters, books, cds, and the other stuff she gives away during those shows.

I'd rather win a car on "Jeopardy", because if I've won 5 times to get the car, I've probably won enough cash to pay the taxes on it, and still have enough to invest.

[Maine-i-acs]

12. Duh ... sell the cars!

Take whatever cash the dealer gives as an equivalent (21K). Save some for the tax bill (5K) leaving 16K for a good used car...

Or whine and crab to Oprah who will probably fork over the tax money too.

[ProdigalJunkMail]

15. but if Oprah pays the taxes too...

then THAT would have to be taxed as income...what a pain. I agree on selling the cars, but I doubt you could get $21K for the car that has already been bought...at best you can expect a 15-20% depreciation so you can knock $4000+ off the $21K leaving you a $17K booty that you get taxed on leaving probably somewhere around $12K. You can still get a nice used car for that...

theProdigal

[mac56]

16. Sell the car on Ebay!

An Oprah car?! Damn, there'd be fans parachuting into your yard in order to buy it!

[readmylips]

17. Any dumb person knew that....

you got to pay taxes on gifts, pay upfront. Selling the car would still be the same, you got to pay the taxes. Some talk shows include the tax, knowing that persons who win prizes can't pay the tax.

Paying the tax is not the only expense, registering a new car in certain states can cost up to $1,000 cash.

[miss_kitty]

30. read this: (From the article)

"That's because while Pontiac agreed to pay for most of the local charges -- things like state sales tax and licensing fees -- the recipients have to report the cars as income once tax time comes."

[Surf Cowboy]

19. Yeah, what a tough break--having to pay the taxes on a free car.

Jeez, what a bitch she is. She really screwed 'em, eh?

WTF are you people talking about? I'd give my left testicle to pay only $7000 for a new car! And you can bet that when they were screened, they were informed about the tax implications. And if they weren't, they can always sell the car and keep the $20,000 difference, after tax.

How many of you would have turned down the free new car because of the tax implications?

Not me.

[pagerbear]

20. You need your left testicle, Surf Cowboy!

[Surf Cowboy]

21. I probably need a new car worse!

[mrboba1]

22. If I had an EXTRA $7000 laying around, sure.

But then, if I had an extra $7000 laying around, I probably wouldn't be buying a $27,000 vehicle.

[Surf Cowboy]

34. Try selling the car and see how much you then have lying around...

[Rabrrrrrr]

23. And this is news? I can't believe that not a single person knew the taxman

was gonna show up. Anyone that dumb deserves what's coming to 'em.

It's not like Oprah screwed the people. Sheesh.

This sounds to me like some idiot newswriter needing some copy to trying to make a sensationalist story out of nothing.

[miss_kitty]

26. 1 guy in the article said this:

"Some of the people who knew me, my smile looked a little bit forced when I was up there ," said William Toebe, a suburban Green Bay resident who was at the taping. "That's because paying the taxes was the first thing that popped into my head."

"As I was standing up there, the responsible portion of me said, 'This is very nice, but where am I going to get the money for the taxes.'"

Toebe, who runs a farm, is already thinking of getting rid of the car, though he has yet to pick it up."

they have until 28 Feb 2005 to pick up the vehicle. If they pick up the car in 2005, the have until 15 April 2006 to stump up the cash.

[Rabrrrrrr]

29. So, then, they did indeed know about the taxes

and thus, the article is attempting to make news out of nothing, in a very sensationalistic way.

Shame on that reporter, and shame on the newspaper.

[SaintLouisBlues]

31. Yes they knew.

I know the person that told everyone about the tax implications.

[miss_kitty]

32. some did. some are just finding out, but

they have plenty of time to set up a special savings acct they can only pay into; they can pre-pay tax and they can have a larger withholding...granted they need to come up with a little more than $350 per month for 20 months, but like previous posters have said $7000 for a brand new car? they can sell it and get the cash, too

[SaintLouisBlues]

33. If they are just finding out now...

it is because they were not paying attention. They were all told right after the show. Most were giddy as hell, so I can see it may have been in one ear and out the other.

They had a choice to accept the car with the tax implications or accept nothing.

[kokomo]

37. but the recipients were pre-screened as being needy.

"Winfrey said the audience members were specially chosen, because family and friends had told the show's producers they needed new wheels." http://money.cnn.com/2004/09/13/news/newsmakers/oprah/

For the needy, $7000 is like a mountain, so I imagine many will sell the car for whatever they can get and hope the sales takes care of the taxes.

[liontamer]

35. are you blaming Oprah for income tax?

:shrug:

[ProfessorGAC]

36. This Is Preposterous Reporting

It's still a free car. The car was NOT paid for by these people. The income they would have used to buy a car would have to be after taxes. So, if they had the money to buy a $27k car, it would have required about $39k in income. Under those circumstance, they would have paid $12k in taxes first, then paid $27k for the car. That's a total of the whole $39k.

Under these circumstance, they report the $27k as income, pay about $8.5k in total taxes. They come out $18.5k ahead!

In addition, they can get a low rate loan using the car as collateral for 4 years, and amortize the taxes over that time at <6%. (You get a really low rate when the bank is only lending 30% of the car's cost.) So, the payment on this tax loan comes out to about $185/month.

You can't get a $185/month payment on a $27k car now, unless you have the $18.5k to place as a downpayment.

So, these people still got the deal of a lifetime. Anyone who would complain about the taxes is either an idiot or just not happy unless they have something to bitch about.
The Professor