$1,000,000 compounding at 10% would grow to $2,347,948 in year 10. The interest earned in year 10 would be $237,795. The tax using a 28% tax bracket as a percent of income is $66,023. This means the client needs to have $66,023 from someplace to pay the tax or he has to net the account. For a married couple, the 28% tax bracket starts at $146,400 to $223,050. The 33% starts at $223, 050 and runs till $398,350.

Since the interest earned is considered income, and is greater than $223,050, Technically they would be in the 33% bracket, but with deductions, my assumption is that the taxable income would drop below $223,050, thus 28%. It could be more or less depending if there was earned income beside the interest earned on the sweepstake winnings and the couple had large deductions. You can get more specific in the tax calculation. For example, the tax bracket on $406,750 as a percent of income is 27.22%. That is because all the money is not taxed at 35%, just the amount above $398,350 to $450,000, then the amount between $223,050 and $398,350 is taxed at 33%, and so on.

It is difficult to explain to clients tax calculation as a percent of income, so for explanation purpose, I just use the tax bracket number, not the tax a percent of income. The tax as a percent of income is calculated when you do your taxes.

The IRA would not work because you can only put $5,500 per person per year if under 50 and $6,500 if over 50. There is no way to tax shelter $1,000,000 lump sum in an IRA unless the money was coming from another qualified plan as part of a rollover.