Kathy Cox Goes Bankrupt

[HRx]

http://www.wsbtv.com/news/18040446/detail.html#-

[TEW]

Bad things happen to good people I wonder how her donation will be handled in her BK. She has to pay tax on that money too.

[justbroke]

Bad things happen to good people I wonder how her donation will be handled in her BK. She has to pay tax on that money too.

I absolutely hate that the IRS' interpretation of the Code is that you can't transfer the entire sum to an irrevocable trust for a Charity, without still having a tax liability. It's absurd that you still have to pay the taxes.

Remember Richard Hatch, the first winner of Survivor. Yeah, he was convicted in Federal Court of tax evasion on his $1M. How in the world did CBS never take taxes out? They must have 1099-misc'd him. LOL

[Never_Again]

I could be mistaken, but it sounds like she donated the money. If she donated it, she takes the $1 Million as income that she won, and itemizes her deductions for a $1 million schedule A charitable contribution, therefore becoming a wash.

Of course, I am not an accountant, or a tax expert, so I could be wrong.

[Trixie007]

I believe that you can only deduct charitable contributions up to 30% of your adjusted gross income, so she would still pay taxes on 700k. For us ordinary folks anyway, maybe there's a different way to do for people with real money!

[justbroke]

I could be mistaken, but it sounds like she donated the money. If she donated it, she takes the $1 Million as income that she won, and itemizes her deductions for a $1 million schedule A charitable contribution, therefore becoming a wash.

Of course, I am not an accountant, or a tax expert, so I could be wrong.

Generally speaking, and there are other rules which apply, you're limited to claiming -- for tax exemption purposes -- only 50% of your adjusted gross income for charitable contributions.

That means, in the best case, you pay taxes on half of the $1M. There are some carryover rules as well, just as the IRS allows Net Operating Losses (NOLs) to be carried forward or backwards. I believe charitable contributions are carried forward only. Regardless of any carry forward abilities, the person would still be liable in the current tax year.

I think you can thank people like Westley Snipes for rules like this.

I've looked into this before because I was dreaming of winning the lottery and giving a lot of it to my brother's charity.

[yeahdischarged]

My question - will the trustee go after that money?

[justbroke]

My question - will the trustee go after that money?

Now I wouldn't like to be the U.S. Trustee who would have their face on CNN Live and the cover of Time Magazine and the Wall Street Journal... but...

I don't think there's anywhere in the Bankruptcy Code that would prevent them from attempting to avoid the transfer of anything over 15%.

Besides, it's probably an annuity anyhow, and it's only $40K a year for 25 years. The Trustee may only be able to touch $40K of it. (Depends on State law and reading of "annuity". I read one NJ case where the judge seemed to read the underlying nonbankruptcy law as any annuity which is non-assignable/transferable... so lottery annuities setup by the State may be exempt. However, most courts are of the opinion, and Florida law is specific, that lottery annuities are not exempt. The funny thing is that many of the lottery annuities are issued by insurance companies! That's why people try to exempt them.)

Would be interesting though... if the Trustee went after it.

[gymbo]

Hmmm

Her winnings would not have even come close to covering her debt... and I'm guessing they weren't hit that hard by the economy is just a few months.
Maybe she knew all along bk was coming and decided she's rather give the money to a good cause then to the creditors.
Just a thought.
To be clear, I'm not judging, just thinking out loud. Or online