I recently read of people in the news who received gifts posted to an internet website that was set up for them...
I'm curious as to whether these gifts are taxable by the IRS, or are they treated as "income"..
Any opinions on this ??
Andy
They are nearly always income. A gift to pay for someone's medical care, if handled properly, is neither a donation from the giver nor income, as it should funnel right to the hospital.
The idea of "donationware" is pretty cool. I put software up for 'free' and you pay either a fixed amount or what you wish if you like it. But, it's a quid pro quo. I am only getting money because you got software.
Same with panhandlers. In reality, they are probably not pay tax on their income, but in theory, it is, in fact, income.
A blog with the icon "buy me a coffee" and link to drop a few dollars is taxable to the recipient.
That's not what the OP is talking about. He's talking about -- I bet
-- the bullied bus monitor incident.
A bus monitor was cruelly taunted by jerky kids on the bus. Someone took a video of it with their phone, posted it to YouTube, and it went viral.
Someone -- with no relation to the bus monitor -- set up a donation drive. I think the target was a few thousand dollars. It's currently $500,000 and counting.
I don't so see why this would be anything other than a gift and so not taxable income to the bus monitor. She didn't ask for money, she didn't put up the website, she's not related to the people who put up the website, she did not perform any services for the people giving the money, etc.
I believe Joe is correct. Any money actually received by the intended recipient is probably taxable income. Any money retained by whoever set up the donation site is also taxable income to that person.
On 2012/06/24 21:07, Rich Carreiro wrote: [...]
She starred in a video made available to the public for entertainment purposes.
I don't see why (at least as far as the intended recipient is concerned) this would be anything other than a gift. The contributions are made out of disinterested generosity and not in return for anything at all.
___ Stu
So the kids on the "Save the Children" tv commercials are taxed on the food they receive from a charitable organization because their images helped raise money for them? I seriously doubt it.
___ Stu
In this situation, the recipient isn't a charity.
The real question is morphing to "in cases where money is given to a needy person, outside of a tax-deductible charity arrangement, at what point is it tax-free? what situation(s) must exist for it to be taxable?"
"I lost my job, please hit 'pay my rent for an hour' " is a solicitation and taxable, in my opinion. Does it change if a third party is soliciting funds on my behalf? Does it change if my house burned down and I have no insurance, and these funds will just rebuild?
To the IRS, is the issue black and white, with clear guidance somewhere, or is this one of those grey areas?
Stu, that is a different situation is no many ways that it is difficult to know where to begin.
First, the donations are made to a charitable organization. Second, those donations are not earmarked for specific children, not even the ones in the public service announcements.
The general rule is that the receipt of any thing of value is taxable income to the recipient. If a cite to an authoritative source shows the OP's situation is an exception to that general rule, I would be glad to have it.
Note: To be a gift there must be no strings attached. "This money is to pay your medical bills," sounds like a string to me. ____
Let's change the facts a little bit. Instead of money to replace someone's burned down home, let's say the money is to pay the legal fees of a politician accused of perjury. Included in or excluded from taxable income? How about to pay legal fees of a politician defending in a civil suit? How about anyone acting as plaintiff in a civil suit. I'm not talking about legal aid helping poor people. I'm talking about individuals donating money to other specific individuals.
If the donations for legal fees are not taxable income and the recipient's legal fees would be deductible as business expenses, would he/she have to reduce the deductible amount by tax free donations? If so, why?
If it isn't legally enforceable, I don't see how it's a string. "I'm giving you this money because you have large medical bills" isn't a legally enforceable requirement. (The bills, as a legitimate debt, is a legally enforceable requirement whether or not anything is specified with the gift.)
Seth
Sure. But I'm talking about the ultimate recipient, who is not a charitable organization. If all else is the same, I don't see how changing who the donor is should make a difference about whether a payment is or is not a gift.
Again, I'm talking about payments by the charity, not payments to the charity. If a child is shown on a charity's solicitation for funds and that child ends up being helped by the charity, I don't see how that is any different from the situation in the OP, other than the identity of the donor.
I'd say that it depends on the motivation for the gift. A payment to a politician by a family member or personal friend would likely be a gift. But if it is from someone who contributed on account of his job, that would be taxable.
Isn't that the tax benefit rule? That is, you can't deduct something from money you didn't pay tax on in the first place?
___ Stu
But the video was made without her knowledge or consent. More importantly, she had nothing to do with the internet site or the solicitation of money.
I actually wonder if the person who set up the site (who is not a charity) and presumably is initially collecting the money might be liable to pay taxes. Perhaps that person should withhold enough of the money to pay the tax before gifting the rest to the victim.
In this case, though, the victim never authorized the solicitation and really took no actions to cause others to contribute to the fund.
Or are they the de facto trustee? (I'd believe they could be successfully sued by a contributor if they kept the money, therefore it wasn't theres so no income.)
Seth
For this example, I think I was clear that it had to be set up correctly. If you were in need of medical care, I'd arrange to pay the hospital directly. I'd not send it through you personally. I believe this avoids both income and gift tax issues. I can send >$13K to pay the bill and no concern. (disclaimer, this is not an offer. If you actually had tragic medical bills, I'm in for a couple hundred buck.)
You keep on stating that she did not intend or set out to make any money, and took no overt actions toward that end.
I don't see how that is relevant. If I walk into a store and they give me a prize for being their 1 millionth customer (and I knew nothing about the promotion in advance), it's the same thing. Would anyone argue that it is a nontaxable gift?
Sure, the store might require me to agree to publicity photos, etc. The bus monitor woman is also now giving interviews about her situation to call attention to bullying, etc, but of course those same interviews are also calling attention to the donation web site.
Interestingly, both the following LA times story and the donation web site itself are claiming the funds are tax free, but no cites provided. If it turns out the money is taxable, of course the IRS will be blamed for being the bad guy.
"Someone even started a petition on Change.Org to ask President Obama to let Klein receive the donated money tax free. It turned out it was not necessary because there are no taxes on the money being given to Klein, but that didn't stop 7,500-plus people from signing it. "
"Thank you to the 7,500+ people who signed this petition. I have been repeatedly advised that it was actually not necessary because there are no taxes on the money being given to Karen.
"As one CPA wrote me: 'As long as no single individual exceeds the yearly gift amount (around $12,000), there are no taxes. And even then, the donor pays the taxes, not Karen.' "
tangent - let's use a CPA who doesn't know the annual gift exclusion ($13K this year) off the top of his head. That to me is a red flag.
There's bad advice everywhere, and I still see no evidence for "tax free".
In the store situation, that's not a gift - it's a promotional prize related to a business. It is not given out of disinterested generosity. However if you are a regular customer the owner knows and get sick, if the owner gives you a car that is not offered or available for anyone else, and gives it to you because he likes you and wants to help, that's a gift.
That "CPA" is apparently confusing gift taxes with income taxes. And if he doesn't know the exemption amount went up to $13,000 some time ago, I'd wonder about his tax competence.
___ Stu
But that's related to the store's business. And you were intended to at least visit the store. Plus, I bet the store is deducting the prize as a marketing/advertising expense.
What if I walked out of my house, went up to the first person I saw on the sidewalk and gave him $1000 with no conditions attached. Would anyone argue that's a taxable gift to the recipient?
As I see it, the money given is a gift and not taxable to the recipient. The IRS defines a gift as "any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return."
Ira Smilovitz
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