Hey, remember the San Francisco Dream House Raffle, that fundraiser for the YBCA in which the purchase of a $150 ticket got you a chance to win a $2.4 million dollar house or $1.8 M in cash? Over the weekend, the Chronicle’s Kathleen Pender gave us some insights into why the winner of that raffle (and many others) chose to go for the dough instead of the land, with an article that gives the scoop on weird and wacky world of the Dream House raffle racket.
Some interesting points:
— If you win the raffle like this and opt to take the house, “the winner must give the nonprofit 25 percent of its value for federal withholding before title can be transferred. The winner also pays closing costs, property taxes and other homeownership expenses.” Shit!
— Since this is, after all, a fundraiser, the nonprofit protests themselves from any losses by setting a minimum number of tickets that must be sold for the prizes to be awarded. If that minimum’s not met, “the nonprofit typically agrees to split the net ticket proceeds (after all raffle expenses) with the winner 50-50. Or it may pay a certain dollar prize based on the number of tickets sold. This is disclosed in the raffle rules.” So you could pay your $150, the raffle could cost the organizers a ton of money, and you as lucky winner may end up with squat.
— If you win a cash prize of more that $5,000, the nonprofit will withhold 25% in federal income tax, but won’t withold state tax — so you’ll have to come up with it by the end of the year. If you’re not a CA resident, the nonprofit will also withhold 7% of your winnings for sales tax. How wonderful to win a big cash prize, see it whittled away by taxes, then get hit with still more taxes at the end of the year. Makes working for a living look better and better.