If he doesn't hold on to it for two years (I think that's how long to qualify for lower capital gains taxes) he's going to pay through the nose in income taxes too. He'll pay far more in increased income taxes than it would cost to keep it for two years - and live there at the same time.
Get a loan against to cover the two years.
Didn't he already owe for a capital gain when he won it? How are winnings such as this taxed, as regular income or as a capital gain?
By virtue of the fact that he won it, he will still owe taxes on it whether he sells it or not. You have to be careful with these things. There was a case down in Florida a few years back where someone who won a boat in a radio station contest decided to take it for a spin before selling it to pay the taxes. They got a lot less for it than it was valued. The IRS declared that, since they took a ride in it, they got it new and sold it used and therefore owed taxes on the inflated value that the radio station used in their promotions. They wound up digging into their pockets to pay.
How about a reverse mortgage? Or those all scams?
I could see that he'll be paying the gift tax on the assessed value, but if he takes possession and then immediately sells it at the assessment, there wouldn't be any capital gain. Would there?
Seems that accepting a gift of $3 million in fixed assets would itself leave you with a $900,000 tax bill, minimum.
He may not want to take the risk that the media doomsayers are right, ie that housing will plunge.
BUMP
"If he doesn't hold on to it for two years (I think that's how long to qualify for lower capital gains taxes) he's going to pay through the nose in income taxes too. He'll pay far more in increased income taxes than it would cost to keep it for two years - and live there at the same time."
He may qualify for the one-time capital gains exemption for the sale of your primary residence.
You are absolutely dead on the money! The loan would be a no brainer and he would enjoy it for two years, not 3 weeks, AND make a lot more money.
Actually, he would pay taxes on the contest winnings--$3M. This would become his basis in the house and there would be no capital gains to be taxes if he sells soon. The two year residential rule will not help him here.