When are donations not taxable to the receiving party?

Correct!

"A rose by any other name would smell as sweet."

or stink.

ChEAr$, Harlan Lunsford, EA n LA

Yes, most likely as Other Income. Losses or expenses on hobby income are deductible as negative income; but if the net hobby income is less than zero (meaning that expesnses are more than income), the net income should be changed to zero.

Calling it a donation does not make it so. A donation is a non-reciprocal transfer and that is not the case with shareware.

-Crystal

Right. It's similar to restaurant tips. The IRS considers them not to be gifts, but to be something given in relation to a business transaction. As such they are taxable.

Stu

Sorry for the wrong advice, after reading the IRS publication, I see that most deductions are reportable on Schedule A, subject to the 2% of AGI limitation, and of course you have to be itemizing to claim the deduction if any.