Latest $564 Million Powerball Share Winner Lives In Another Country - And It's Causing Problems

A Puerto Rico Powerball ticket.

One of the three winners of the Feb 2015 Powerball is facing a peculiar problem, according to this Washington Post story.

That's because the winner lives in Puerto Rico. It is the first time anyone outside the continental United States has shared in the lottery's winnings, and it's giving officials a headache.

The victory is something of a miracle for the island, where Powerball has only been operating since October, but raises the question: Will the winner have to pay federal taxes on the prize money, or will the cash come free of federal taxes like all other lottery prizes that are given out on the island?

The answer hinges on an interpretation of Puerto Rico's tax code, which functions a bit differently than it does in the rest of the United States.

Residents of the island don't have to pay federal taxes for income earned in Puerto Rico, a quirk which has allowed previous lottery winners to collect their millions tax free, at least until now.

Roberto Montalvo"It's a very peculiar situation. It's unlike any other lottery here," said Roberto Montalvo, a tax attorney at local law firm Goldman Antonetti & Córdova.

"My guess is that it all comes down to what is considered the source of the income. If it's Puerto Rico, then it will be federal tax free. If it's the mainland, then it won't."

The person who purchased the winning ticket in Puerto Rico has yet to step forward. When they do they'll join two others—one in Texas, and another in North Carolina—who also drew the prize numbers.

There are other countries where you don’t pay any tax on the win at all. These countries pay out a lump sum immediately, tax-free, to all lottery winners:

Australia 
Canada 
Finland 
Germany 
Ireland 
Italy 
Liechtenstein 
New Zealand 
United Kingdom.

SOURCE: Washington Post