How Much Does it Cost Oprah Audiences to Receive Free Gifts?
Oprah, the queen of gift giving has once again proved how material the world is. The joy of getting things supposedly for free makes her audiences euphoric. The mainstream media is over this news head over heels.
The first reaction I had watching clips of her show titled Oprah’s Favourite Things 2010, is oh! well, I am not Oprah and I do not make money like Oprah, so these could certainly be her favourite things, not mine.
Then again, it’s a commercial TV show. All her favourite things were paid for by the manufacturer of the products for free to Oprah show, to promote their products for the 2010 Holiday Season.
So, if Oprah really likes to drink Coke and Pepsi provides free drinks to her audiences, what is Oprah going to say her favourite drink to the audience? Pepsi or Coke?
Oprah show is just another platform of advertising for the products listed on her 2010 favourite things. Once you understand this simple concept, you will see her gift giving in a whole different way.
Hundreds of product manufacturer line up to show their products on Oprah show. It’s the holy grail of product showcase, because of the sales bump the products receive after showcasing on Oprah show. They enthusiastically agree to provide free products to Oprah audiences. Its their advertising cost.
It does not cost Oprah a single penny to give her audiences lavish gifts, be it a Pontiac G6, 2012 Volkswagen Beetles, or thousands of dollars worth of other gifts.
But for the gifts recipients these free gifts could be a ride through the hell.
All because of IRS, the US Tax Agency.
In 2004 Oprah, presented her audiences a Pontiac G6 (now a company, erased from the face of the earth), but many of them had trouble accepting the gift, because the Taxes they would owe, if they receive the gift.
The gift promotion cost Pontiac about $3 million, her audiences cost sales tax and income tax, and cost to Oprah was zero.
On, November 22, 2010 Oprah again gave away 275 2012 Volkswagen Beetles. But this time she was able to negotiate “all taxes and fees” from Volkswagen with each car. So, her audiences will not have to pay any money out of pocket to receive the cars.
But another Tax they will be incurring is the income tax. They will have to add the total value of the car, all taxes and all fees and report it in their income tax return and pay tax.
It goes same for all other gifts too. The gifts are free. But you still have to report, the value of your diamond watch, cashmere sweater, cruise and all other gifts and pay tax to IRS.
If I am right, it would be Oprah’s company responsible to distribute the gifts and also hand out IRS approved income slip to each recipient and send a copy to IRS. Coming tax time, each recipient will have to report that income slip with their tax report.
I just read some news report that many Oprah gift recipient are planning to re-gift the gifts they will receive. Along with making someone else’s dream come true, that’s a very smart Tax Saving Strategy too.
Income Tax on World Series of Poker Winner
You probably heard from any of your favourite Canadian news sources that Jonathan Duhamel, 23 year old from Canada has won the World Series of Poker in Las Vegas. The winning awards him US$8.9 million in prize money.
Unlike the Vancouver Lotto Jackpot winners, who don’t have to pay any income tax on their $50 million winning, Duhamel, will have to pay tax in USA, Canada and his province of residence. There have been interesting developments in tax on Poker winnings in Canada for last few years.
An increasing number of Canadians are playing online poker regularly and winning. To begin with, lottery and gambling winnings in Canada are not subject to income tax, as I mentioned in my previous post, since these income are not from an “income from a source” of employment, business or investment income.
This all changes when Poker or Gambling winning becomes a source of income from a running a business. If you spend a significant amount of time, playing poker, spend a substantial amount of money for playing poker and pay for your living expenses from your poker winning you are in a business and you must report your income from playing poke to Canada Revenue Agency. Canada Revenue Agency can decide if your poker winnings are taxable or not by reviewing taxpayer’s poker playing habit.
Regarding Jonathan Duhamel’s winning, he won in a professional poker tournament that makes his winning taxable both in Canada and USA. Since he won the prize money in USA, he will get the prize money after tax. If he has a Social Security number, he can get all the winning but he will have to report the winning in his USA tax filing and pay tax on the winning.
Since he is a Canadian citizen, and assuming he does not have a US Social Security no., he will get his prize money after 30% tax deduction by IRS. He will have to request for a US non resident Tax Payer Identification (TIN) no. and file a US tax return and could get some of the tax deduction back from IRS.
In Canada, he will have to report his winning in his Income Tax Return and also the taxes that he has paid in USA. Since Canada and USA have income tax treaty, he will get credit for taxes paid on his winning in USA and will pay a smaller amount of Tax to the Federal Government. Then the Province of his residence will come after him for their share of Dhuamel’s winning.
After doing a rough calculation, he is expected to net $4.6 million after tax from his $8.9 million prize winning.
I am assuming that he will claim that he is not a professional poker player, to avoid reporting his income in Canada. So far, all the news I have reviewed about Jonathan Duhamel, I don’t think his claim is going to fly over CRA. His Tax Advisors will have a hard time to prove that he is not a professional poker player.
Bloomberg news reported that there is an evilcpa, and Las Vegas poker players bring her to keep their poker winnings from IRS’s tax grab. Jonathan Duhamel should seek her help too.
Canada Revenue Agency Income Tax: CRA Income Tax payroll tax Tax Tax Rate US Tax
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How Much Tax Do You Pay on $50 Million Jackpot Winning?
After a $50 million Jackpot was won in Vancouver, people are curious as to how much tax do you pay for that Lotto winning?
The winners should thank their luck that they have won the Jackpot in Canada.
If they had won the Lotto in USA, they would have to pay 38% or more of their winning to IRS.
Since they have won it in Vancouver and are not U.S. citizens, their Tax liability to the Canada Revenue Agency is, “0”.
Lotto or any other lottery winning is not taxable in Canada.
As per Canadian Income Tax Act “Income from a source” of employment, business or investment is taxable income. Since lottery winning is not a regular source of income, not a single penny of the winning is Taxable under Canadian Income Tax Act.
Unfortunately it is a different situation for U.S. citizens or lottery winning in USA.
If you are a U.S. citizen, it does not matter where in the world you win a lottery; you must report and pay income tax on your lottery winning.
If you are not a U.S. citizen and you win lottery/gambling in U.S.A. 30% to 38% of your winning will be taken out and sent to IRS, before you are given the winning proceeds. You must file a Non-Resident Income Tax Return, to get the tax deducted at source back. How much you will get back, depends your foreign residential status and any tax treaty agreement between the USA and your country of residence.
Vancouver’s Tax Payers are on the Hook for Olympic Village
Vancouver City Mayor Gregory Robertson announced that the city Taxpayers might suffer a loss on the sale of Olympic village condos.
Where as news reports are announcing that real estate price is going up all over Canada, it seems the developers of the Olympic condo complex having a difficult time to find buyers for their highly inflated priced, state of the art green tech residential complex.
City of Vancouver is on the hook for $1 billion in the development of the Olympic condo complex.
City loaned the money to the condo developer and was hoping to get it back, by the sale of condo in the complex, after the Olympic is over.
It has been eight months since the Olympic ended and the condos are still not sold, because the price is too high.
Developer Millennium is negotiating with the City to reduce the price of the condos to move them
Unfortunately, if the condos are sold at a reduced price, Vancouver city will not be able to recover the $1 billion tax payer’s money, invested in the project.
The Mayor said, “It’s impossible to predict now. The challenge is if sales don’t make it and the city can’t recoup the gap from Millennium’s asset base, then there is a loss.”
The Olympic Village Condo Complex has become a “White Elephant” for the City of Vancouver. The city had problems with finding Management Company of the complex. Early buyers are trying to back out off their contract. Several open house failed to attract new buyers.
Our Tax Money At Work.
Canada Revenue Agency Income Tax: CRA payroll tax Tax Rate
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Annual Contribution to CPP is Raised to $185 a Month
The CRA has increased the maximum pensionable earnings to $48,300. There is a CPP exemption on earnings up to $3,500. You do not pay any CPP if your annual earning is $3,500. The current CPP rate is 4.95% for both the employer and employee.
Since the CPP premium rate is unchanged, and the pensionable earnings went up, net CPP is up for both employees and employer. Maximum CPP premium will be $2,217.60 for employees and $4,435.20 for the self employed annually.
From Jan 1, 2011 EI premium is going up also.
So, expect to see a smaller pay cheque if your earnings remains the same in 2011.