New Law Affects Property Raffles
By Charlene D. Moody
Deputy Legal Counsel
The Real Estate
Commission often gets calls from licensees and homeowners seeking alternative
ways to bring about sales. One such method suggested by callers is to raffle a
home. The seller would sell raffle tickets, the winning ticket-holder would
receive the property, and the seller would receive the proceeds.
In the past, the answer
was clear that under
The maximum appraised
value of the real property to be raffled is $500,000 for any one prize and the total appraised value of all real estate
prizes offered by one nonprofit organization may not exceed $500,000 in any one
calendar year.
Licensees must note that
the statute authorizes only nonprofit organizations or government entities to
conduct raffles.
Sellers might ask if
they would qualify if they donated a portion of the raffle proceeds to a
charity. However, the statute provides that the proceeds of the raffle may not
be used to compensate any person to conduct a raffle. The Commission,
therefore, takes the position that the seller may not receive any part of
the raffle proceeds nor may a licensee receive any fee or commission from the
raffle proceeds.
A person conducting a
raffle in violation of N.C.G.S. §14-309.15 shall be guilty of a Class 2
misdemeanor.
Additionally, licensees
and the public should be aware that there may be surprising tax consequences of
winning a real estate raffle. Licensees should advise any participant in such a
raffle to consult a tax advisor concerning the tax consequences to the winner.
For example, in the current tax year, the home may be reportable as ordinary
income, leading to a large income tax bill.
Further, when the winner decides to sell the
home, he or she may encounter a large capital gains tax because the cost basis
for the home will be the ticket price rather than the value of the home.