Background: The young daughter of one of my friends is excited about collecting the Monopoly Cards at the supermarket in the hopes of winning a non-trivial prize. (So far, she has won four doughnuts.) I never used to collect the cards, but now I am collecting them for her. My friend has five children, four of them under 16, and all of them are extremely likely to go to college.

The Question: I know how unlikely it is that this child will win a non-trivial prize, let alone the top prize of $1,000,000 (one million $$), but what if she does?

What are the tax avoidance strategies this family can use to reduce the income tax consequences? Ignore the option of taking the prize over 20 years.

My thought is that all five children should claim to be co-owners so that there will be five awards of 1/5 the prize instead of one winner of the whole prize. I do not know if this is within the Monopoly rules, but if it is, it should reduce the Federal Income Tax significantly. Is there anything else they can do, such as putting money in education funds for all five children? As for state taxes, they live in one of the lower state income tax states, and moving to a zero income tax state is possible, but not very practical.

Please, no comments on the statistical unlikelihood of winning. We know that.

I am asking this possibly frivolous question in the spirit of Be Prepared!

  • 2
    I'm pretty sure you must be 18+ to claim the prize to begin with. Outside of maximizing deductible items such as IRA and HSA contributions to lower their AGI a small amount, they could put some in 529 plans, which may help on some state tax (mine allows up to $1000 total tax credit).
    – topshot
    Mar 28, 2019 at 17:56
  • 1
    BTW, the long-time fraud that occurred is a fascinating read if you dig into it.
    – topshot
    Mar 28, 2019 at 18:00
  • Don't forget the possible option to collect it yourself and issue the one time gift options for children. There are limits but I believe each parent can issue a gift independently. There may also still be the gift to spouse option (think shawshank redemption). If you can assign the win separately, you could eliminate the tax obligation from some and accept it as is for the rest. I'm posting this as a comment because I don't know the legalities behind any of that or whether or not it applies to winnings. Food for thought and research I suppose
    – Kai Qing
    Mar 28, 2019 at 23:15
  • @topshot IRA contributions require that the taxpayer have compensation (essentially earned income plus commissions on sales etc) and the IRA contribution is limited to $5500 or the total compensation whichever is smaller. Lottery winnings, sweepstakes, Publisher's Clearing House awards, etc are not compensation. Mar 29, 2019 at 13:43
  • @DilipSarwate I'm aware of that. I would have expected the parents to have earned income since that is who the winnings would go to since the kids are underage.
    – topshot
    Mar 29, 2019 at 16:42

3 Answers 3


The persons sharing the lottery prize can be organized into an LLC and then the LLC can possibly claim the prize. Now minors can't manage the LLC as the manager of the LLC must be 18 or older. But the income into the LLC is taxed according to each member's share and on each member's personal taxes.


Probably depends on the exact rules of the lottery. For instance, the Maryland Lottery states that a prize of $5001 or more, the lottery will automatically deduct 24% federal tax and a state tax (percentage depends on residency). Lottery winnings are generally considered income, so the normal income tax avoidance strategies would apply.

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    Note that withholding doesn’t equal tax liability. You can still take steps to minimize the latter.
    – prl
    Mar 28, 2019 at 18:07
  • @prl - And those steps would be what? Mar 28, 2019 at 19:09

Here's a novel, and probably unpopular, suggestion:

They could pay the taxes and be very grateful for the very large windfall.

Then find a professional tax advisor to suggest how to invest that windfall to pay for her education.

  • First, tax avoidance is legal; it is tax evasion that is illegal. Tax avoidance encompasses, e.g., taking a medical deduction based on your and your family's doctor bills. Tax evasion is including the vet bills for your cat in your medical deduction. As for the morality of sharing your windfall, you have a point. But, unless you think the Federal Government is the most perceptive and efficient and effective dispenser of help to citizens & the environment, it would be better to arrange for a charitable foundation to be a co-owner of your winning lottery ticket than to pay avoidable taxes.
    – ab2
    Mar 29, 2019 at 20:42

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