By Diane Fuller
Contributing Editor

Even though you're more likely to have conjoined twins than win the lottery, when a jackpot builds to a staggering amount ($1.5 billion Powerball in January of 2015), we all probably dream of how our lives would change for the better.

Although, sometimes a big win is just the beginning of some sad consequences. Winners have committed suicide, been the target of hit men hired by relatives, poisoned their spouses, and generally mismanaged funds and ended up in bankruptcy.

To avoid such a fate, the American Institute of Certified Public Accountants has come up with tips to manage such newfound wealth.¹ First, according to Bloomberg.com,² the jackpot will shrink by approximately two-thirds. So based on a $1.5 billion pretax value for annual payments (or a $930 million pretax value for a lump-sum cash payment), the U.S. government will take approximately 25% off the top in taxes and another 14.6% at tax time, leaving a measly $561.7 million in states that do not tax winnings, which includes California.

According to the AICPA, winners should try to keep a lid on the news. The Multistate Lottery Association runs the Powerball and identifies only five states where winners have the legal right to remain anonymous: South Carolina, Delaware, Kansas, Maryland, North Dakota, and Ohio.³ In California, the law requires the California State Lottery to release the winner's name and the location and name of the retailer who sold the winning ticket.⁴ Some attorneys have recommended creating trusts or forming an LLC to at least shield a client's identity.

If winners are doing everything right, they'll pay off debt, save, do some serious tax and estate planning, and give to charitable organizations. Lastly, the AICPA recommends that the winner not stop working. Really??

By Sandy Weiner, J.D.
California Editor

In writing an article for our next edition of Spidell's Federal Taxletter^®, I came across a case where the judge found the IRS's actions so spurious that he compared it to the actions of Caligula, who would post the tax laws in such fine print and so high that his subjects could not read them. By doing so, it made it quite easy to be far more creative and/or selective in their enforcement.

Having been raised in Chicago, such type of actions felt fairly familiar, in a very Machiavellian kind of way. In Chicago in the 60s and 70s under Richard Daley Sr. (aka "The Boss"), things ran very smoothly — at least for his machine — and although some "taxes" may have not been specifically listed in the books, collections were rarely a problem.

Comparatively, all the "reforms" we're hearing about recently appear rather gray and bland. So I started thinking — what would Caligula do in terms of tax reform? What other creative schemes that were used in the past might we resurrect? I mean, why reinvent the wheel? Here are a few old tax "reforms" that caught my eye:

• Caligula proposed taxing marriages, prostitution, and lawsuits — although I could see the Bar Association fighting this one for a variety of reasons;
• Ancient Egypt taxed cooking oil, which produced a double benefit for the Pharaohs because everyone was required to buy cooking oil from them and people were prohibited from purchasing previously used oil — old-time Chicago politicians must have read up on their Egyptian history;
• Roman Emperor Vespasian placed a tax on urine, which was purchased for a variety of purposes such as tanning and as a source of ammonia to wash clothes and bleach their white togas — I'm never going to a toga party again;
• Russian Emperor Peter the Great put a tax on beards as part of his effort to clean up the Russian image — they may need to impose a tax on computer servers now; and
• In England, Oliver Cromwell placed a tax on his political opponents, the Royalists — oh for the good old days.