Clearly, it’s not illegal to give lottery tickets as gifts. Witness the bombardment of ads promoting such generosity, especially around the winter holidays.
Nor is it a conspiracy if two people have an agreement about playing the lottery and dividing prizes.
Under Texas law, “only one individual or legal entity may claim a prize,” and in doing so must sign a pledge that “no other person or entity is entitled to claim any part of this prize.”
Things do get dicey, though, when money trades hands, according to Karen Gerstner, a Houston estate lawyer who has advised many lottery winners.
“It is illegal in Texas to pay someone a fee for buying a lottery ticket for you,” she said. “The person in an office who collects funds from everyone and goes and buys lottery tickets on behalf of the office pool is not breaking the law. … But if he/she extracts a fee, that's against the law.”
Then there’s the IRS.
“Any time something of value is transferred from one person to another, you have to consider the federal gift-tax consequences,” which can get complicated, Gerstner said.
“To be a valid prize-sharing contract with no adverse gift-tax consequences, the parties must each receive the percentage each contributes to the partnership,” she said. “If I put in 20 percent and you put in 80 percent, and if we share the lottery winnings based on those percentages, then neither of us has made a gift to the other. But if I put in 20 percent and you put in 80 percent, but we split the lottery winnings, 50-50, then you have made a gift to me of 30 percent.
“Again, that is totally separate from the income-tax consequences of winning the lottery,” she said.
Gifts below a yearly ceiling, though, are free from taxes.
Nefarious possibilities exist as well, of course.
Earlier this year, an investigative series in the Palm Beach Post looked at people with dozens of lottery wins, and pondered a variety of criminal activities. Retailers have been known to accumulate winners by ripping off customers, lying about what tickets are worth. Professional ticket cashers redeem winners for people fearful of public scrutiny, including deadbeat dads, fugitives, welfare recipients, divorcing spouses, and undocumented aliens. Drug dealers and other criminals, seeking to launder money, have been known to buy up winning tickets, often with retailers’ help.
A Texas jury ruled Jose Luis Bettancourt had to forfeit a $12 million prize because drug money was used to buy the winning ticket.
Generally, schemes that obtain winning tickets from players wind up claiming prizes from games of all types, including drawings, and at all sorts of price levels.
Contact staff writer Peter Mucha at 215-854-4342 or email@example.com.