We Live in a "Taxing" Environment
My Mom's favorite show to watch on television was "Wheel of Fortune." I'm sure you've seen it. Thousands of dollars in prizes are given away in every episode, and the ecstatic contestants squeal with delight as they are presented with such things as trips to Fiji and new automobiles. Who wouldn't love such a good deal?
But wait a minute....you have a "partner" in this transaction - Uncle Sam. Suddenly your great windfall becomes a burden, especially if you are awarded merchandise instead of cash. For example, let's say you just won a new car worth $29,000. The game show will issue you a Form 1099 that shows you have just earned $29,000 in income. Not only might that bump you into a higher tax bracket, but state taxes may also apply. You could find yourself having to come up with an extra $7-9000 just to pay the taxes on your winnings. You might even have to sell the vehicle to do that.
Your government wants it's money (you didn't think it was yours, did you?) and it will get it. Ask any retiree about Required Minimum Distributions and they'll give you a very good answer on how our tax code affects us all.