Have a Tax Question? Ask a Tax Expert
Lottery prizes are taxable and will have to be included in income even if you accept it in Living trust, Irrevocable Trust, Corporation or partnership. The federal taxes will be withheld from the prize amount before you get a check.
Btw, you cannot remain anonymous. Tennessee law requires the Lottery to disclose the name, home state, and home town of winners if a request is received for such information.
Let me know if you have any question. Bonus and Feedback will be highly appreciated!!!
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.
If you accept your prize with a living trust, the trust name is disclosed.
Yes in that case the trust name is disclosed.
The lottery check can be issued to an individual, corporation, organization, partnership, trust or estate. Any non-individual claim must provide documentation of authority to the them before the prize is paid. They will accept Internal Revenue Service (IRS) Form 5754 if a group of individuals are claiming a prize. The form must be provided at the time the prize is claimed, and each of the member or group members will be subject to all applicable Federal, State and debt setoff withholdings and identification requirements.
Accepting in a Irrevocable trust will mean that it will be taxed at trust rates which may be higher. Also, there may be gift tax implications.
First of all you need to have a Corporation or a Partnership in effect when this transaction occured in order to take it in these entity or it will be considered as you getting the winnings and than contributing it to the entity.
Accepting in a corporation, a C Corporation will be taxation at corporate level and also at individual level when you get this amount as dividend.
You can accept it in a partnership only if you have more than one person who share this lottery winning.
So I would consider that accepting it in a living trust is a better option. It keeps your winning safe from third parties plus you report the winnings on your personal tax return since it is a revocable trust.