If a lottery prize winner transfers the prize to a qualified government unit or nonprofit organization,then the prize is excluded from the winner's gross income if the amount of the prize does not exceed 25% of the winner's AGI.

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Lottery winnings are generally included in gross income regardless of whether they are transferred to a government unit or nonprofit organization. The exclusion based on a percentage of AGI does not apply to lottery winnings.

If a Lottery Prize Winner Transfers the Prize to a Qualified