Search the Lounge

Categories

« Healthy Housing Markets | Main | 56 »

March 17, 2011

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

Gregg Polsky

Bridget,

The gross up payment amount does reflect that the payment itself is taxable. They value the total prize (including the tax payment) at $3,000; $750 reflects the 25% withholding rate on prizes.

The "mitigate" language was used to reflect that, if the winner is subject to a marginal tax rate higher than 25%, the winner would owe additional tax on the prize.

C

Gregg is correct - Sheen can only guess into which marginal tax rate the ultimate Winner will fall. If the Winner has no other reportable income for the year, the $907.50 mitigation payment would likely be a windfall.

Assuming the marginal rates of 25% (federal) and 5.25% (state) are correct, Sheen could mitigate all the tax affect with an additional $1,301.08 payment, instead of $907.25, thus eliminating the "doom loop."

John

For any tax rate it can be *eliminated*. The series converges (quite rapidly I might add). See, Zeno's paradox.

The comments to this entry are closed.

StatCounter

  • StatCounter
Blog powered by Typepad