As reported by the South Florida Sun Sentinel, a Fort Lauderdale couple has decided that since their house that they purchased for $2.35 Million in 2005 isn’t selling, the next best thing to do is to raffle it off. They’re intending on raffling off 300,000 tickets for $10 each. It’s a pretty sweet looking house as you can see below, but there may be some “fine print” or no print at all that you have to figure out yourself before taking the plunge.
What potential bidders should consider is whether there are tax implications if they win. The fine print in the “terms” states: “Saint Simeon Church is obligated to report the value of the prize to tax authorities as income…All federal, state and local taxes associated with receipt or use of prize, including without limitation all applicable sales, use, luxury, income and special taxes are the sole responsibility of the winner.” Of course, if they could bridge the win and re-sale by tax time and have the liquidity to pull it off, I’m sure they’d come out ahead in the end (assuming the home doesn’t decline another 50% during the time it takes to sell it). But, let’s say you’re looking at a $2Million valuation (generous, given $2.35 Million at the peak of the real estate bubble in one of the worst markets in the country – See Case-Shiller Index and How to Invest/Hedge Real Estate) and the federal, state and local taxes owed are say, 40%.
That would be a $800,000 Tax Bill!
Couple that with a sale. If there’s transfer tax in Florida like many other states, as well as taxes on any gains during the time from possession to sale, some more taxes.
I was also thinking about the math on the raffle. Hmmm. 300,000 tickets at $10 = $3Million. So, between the couple and the church that’s administering the raffle, they’re taking in $3Million on a home that likely wouldn’t even fetch $2Million. A $1Million Profit (or 50% Profit) for some ingenuity in turning a bad situation into an innovative opportunity? Not bad, huh? On one hand, the odds are clearly in favor of “the house”, but still a better payoff to odds ratio than a typical state-run lottery.
The auction can be referenced here.
Disclosure: I have not bid, nor do I intend to.
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