Welcome to Trivia Tuesday! Our weekly blog column where we will reveal a few surprising facts about any given subject. We've covered anything from the Oscars
, to Boeing
. to Warren Buffett
and today we're brinigng you a collection of the most surprising taxable incomes. Hang tight, because this list might just surprise you.
#1: The "Treasure Trove" tax
Let's imagine you're walking down the street and you stumble onto a dirt covered gold coin. Curious because you've heard old coins can sometimes be worth millions, you bring it over to the local pawn shop. After a quick inspection you find out that the coin is worth $500,000!
This brings you to your knees in pure joy, that is until the IRS shows up and tells you about the found property or "treasure trove" tax
If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession.
This exactly what happened in California, when a couple found what amounted to be million worth of gold coins
on their property. Upon this discovery, the couple were informed they might have to pay upwards of $5 million in taxes with a 39.6% federal tax rate and a 12% California state income tax.
#2 The Stolen Property tax:
Al Capone himself (Courtesty of Biography.com)
Remember how Al Capone was convicted on charges of tax evasion
? Well that's because stolen property and income from illegal activities are taxed and not declaring those particular incomes is illegal.
Officially, the IRS states says that:
Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity
Even criminals must pay up or face prosecution!
#3: Olympic prize money can be taxed.
In addition to medals, Olympic athletes in the United States receive $25,000 for gold, $15,o00 for silver and $10,000 for bronze. However, since that income was earned abroad
, it can be taxed anywhere from 39.6% to 10%. That means many gold medalists who are in the top bracket will end up paying $9,900 in taxes on their prize money.
Gold Medalist? Good, now pay your taxes!
#4: Fantasy Sports winnings are also taxable:
Yes, that's correct, if your amazing, albeit imaginary, football team won you some cash this year, you're entitled to pay taxes on it
. Granted, you can county entry fees for other sports leagues or bracket competitions against the winnings, but you can't compound previous years of entry fees. So if you've lost your $100 entry fee over the last 10 years but won $1000 this year, you still owe taxes on that $1000 since every year is a separate entity in the eyes of the IRS.
#5: Scholarships are taxable
According to the IRS
A scholarship or fellowship is tax free only to the extent:
- It does not exceed your expenses;
- It is not designated or earmarked for other purposes (such as room and board), and does not require (by its terms) that it cannot be used for qualified education expenses; and
- It does not represent payment for teaching, research, or other services required as a condition for receiving the scholarship.
This is interesting considering that students are generally in the lowest tax brackets, it would seem that they would only get taxed to a minimal however, scholarships are an exception to this.
Did these facts surprise you? Join the discussion here