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Since US lottery winnings greater than $5k (I believe) have taxes automatically withheld from the payment, and the annuity payment always comes from the lottery organization in the state in which the ticket was bought, you have no way to escape owing (and paying) taxes to the state you bought the ticket in.
When there is a significant delta of price paid vs current redeemable value, it seems this can still be a perk for the donating taxpayer in some circumstances, such as with lottery tickets that are known winners already. If the donating taxpayer pays $1 for the ticket. Their cost basis is $1.
It seems to me like a better distinction would be that an investment has a positive expected value, whereas a lottery ticket and any gamble usually has a negative one, or potentially a zero expected value in the case of a zero-sum game. Then a heavily discounted lottery ticket would indeed qualify as an investment.
Lottery winnings are payed by States/State-run corporations and as such sourced to the State that pays it. Buying a ticket in SC links you to the lottery run in that State, even if you live in another. You'll be claiming your winnings in SC, not in NC, and the winnings will be sourced to SC, not NC. As such SC will be taxing them.
"You've just won $20 million in the lottery" Oh wow! thanks for the hot news! Where do I send the $1000 check to cover the bank fee? More seriously, while California might be marching to the beat of a different drummer, many state lotteries with large jackpots pay off over many years, and a $20 million win might actually be paid out in $1 ...
While buying a lottery ticket is on average a loss, it provides us with a chance to obtain an amount of money we would normally never get. (Eric Lippert made this argument already.) The lottery fee buys us a small chance of something very valuable, much as the insurance frees us from a small risk of something very bad. If we don't buy the ...
Gambling losses cannot carry forward to future years, for most tax situations. Per the IRS: "If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. If you're in the trade or business of gambling, use Schedule C (Form 1040)."
I checked California's lottery. Their claim form simply states that you must declare whether you are a citizen, US resident alien, or neither. If you're one of the first two, the California Lottery will withhold 25% for federal taxes. If you're neither, they will withhold 28%. If you do not declare one of these, they'll withhold 30%.
So, right off the bat. The first $2 million of your lottery winnings, you slap them in an "endowment-like thing" and draw them down at a conservative 4%. This will give you $80,000 a year and still leave room for the "endowment" to grow, so the $80,000 will also grow with inflation. That funds your basic needs.
The tax on lottery winnings is based on the state where the lottery was held, because for legal purposes that's where the winnings are considered to have been earned for taxation purposes. Also, changing where you live after earning money does not change your tax liability at all. You still owe the state where the money was earned the tax that ...