Taxes Forced 2005 Sweepstakes Winner To Forfeit Prize

It may be a bit early for a story about taxes -- if you're like us, you're in a state of denial right up to April 14. No matter what your tax bill this year may be, though, it still won't be as bad as the story of Brian Emmett... who was forced to give up a once-in-a-lifetime opportunity to fulfill his childhood dream to fly into space.

Why? Well, there is really no other way to say it... because of the IRS.

The Associated Press reports Emmett won a ticket into space in a 2005 sweepstakes by Oracle Corp. He answered a series of questions online about Java computer code to win the prize, a seat on a future commercial spaceflight. The prize was valued at $138,000 -- a bargain, compared to today's price of over $250,000.

At first, it was a dream come true for the space buff -- the payoff for years of watching shuttle launches, and attending space camp. But then reality set in... as Emmett realized he would be on the hook for $25,000 in taxes.

As with any large reward -- and as many a lottery, sweepstakes, and gameshow-winner have also realized -- winnings are reported to the Internal Revenue Service as income. And that means winners are responsible for the income taxes on their winnings.

Emmett, a 31-year-old software consultant from the San Francisco area, gave up his seat to avoid paying the bill.

"There was definitely a period of mourning. I was totally crestfallen," Emmett said. "Everything you had hoped for as a kid sort of evaporates in front of you."

Oracle was one of the first companies to dangle a commercial spaceflight before prize hopefuls. Two years later -- with the dawn of commercial spaceflight moving ever-closer -- more and more companies are offering rides into space aboard such vehicles as Virgin Galactic's SpaceShipTwo, when they begin flights sometime in 2009.

As Aero-News reported, even Microsoft has gotten into the act, offering a seat on Rocketplane Limited's LearJet-based space vehicle as the grand prize in its intricate 'Vanishing Point" promotion for the Vista operating system.

In Microsoft's case, group marketing manager Brian Marr says a $50,000 check that comes with the $253,500 prize should cover the winner's taxes. But winners of other contests may not be as fortunate.

"From a consumer perspective ... I'd be wary," said Kathleen Allen, director of the University of Southern California's Marshall Center for Technology Commercialization. "I'd check to see the fine print."

Greg Jenner, of the American Bar Association, says winners can help ease the financial burden by arguing they don't owe the taxes until the flight actually lifts off. Or, one could work out an installment plan to pay the tax.

But either way... you'll still have to pay eventually. Which means if you couldn't afford a ride into space at face value... you may not be able to afford a "free" ticket just yet, either.

FMI: www.irs.gov