If you live in NYS you can't escape a certain car dealership and their relentless ads. Even if I'm just turning on my TV to get to Netflix or Amazon there is a 82.4% chance I'll see one of his ads.
We discussed previously this dealer's penchant for hype with his "buy a car, get a cruise" promotion, but the latest promo - Come into our dealership and get a chance to win a HOUSE - will thankfully come to a conclusion later this week.
I thought I'd write a note on this because many people don't understand the way contests work and at the end of the day I'm 75% sure that Mr. Huge won't be giving away that house after all .... unless a reader wins :)
First, if you read through the mouse type on the commercial (which is so absurdly small that no human could read it in real time) you'll see that the grand prize does include....
1) a vacation house in Cape Coral, Florida - a lovely town apparently but one that seems to have a bit of a foreclosure issue.
2) A choice of a new car
3) $10,000 in cash
4) a trip on the $300 cruise that was earlier advertised.
The total value of the package is $164,885.
Ok, I can hear you now - who wouldn't take that? Stop being such a grumpy old man shouting "get off my lawn" Mr. Grindstone Financial.
Well, further down in the mouse type is something that should tip you off to what is most likely going to happen.
"The Grand Prize Winner shall be responsible for the payment of any and all federal, state and local taxes." Ding, ding, ding! We have a winner.
You see, this "prize" is actually INCOME. So, if you make $50,000 and you win this prize you're income in 2014 will jump to $215,000 and you'll be asked to write a check in the neighborhood of probably $50-$60,000 to the IRS and NYS. While, it's impossible to know exactly how much the tax burden for each individual would be, it is unlikely that the sort of person that goes to a car dealership to enter a contest to win a house has $50,000 in cash sitting in the bank to cover a sudden tax burden.
Ah, but never fear, the dealership has thought of a way to fix all of your problems!
"In the event that the Grand Prize Winner is unwilling to accept the Grand Prize, they may elect to take $50,000 in cash as an alternative prize".
Now, you still have to pay tax on that cash, so you'll probably clear $30,000 or so, but at least you would have cash to pay the taxes. Still, $30,000 is a nice prize but not exactly enough to buy your dream vacation home.
Anyway, if anyone that reads the blog does win here is my advice and since this is free understand that you get what you pay for - take the house/car/cash package.
Then immediately upon closing, put the house/car package up for sale for $120,000 cash. You'll probably get a bunch of bidders on a new car and house for $120,000 (heck, shoot me an email and we'll settle up quickly).
Sell the house/car ASAP and now you'd have $130,000 in the bank (adding in the $10,000 cash piece of the prize). Take $50,000 (or whatever your tax attorney says you owe) and on April 15, 2015 write a big painful check to Uncle Sam and NYS. Again, I'm not even allowed to do the taxes in my own home so understand that my tax knowledge is only slightly better than that of the average Congressman.
Sit back and realize you were still able to clear $80k which is far better than the "cash option" presented by the dealership which would have netted you only about $30k :)