When is a "gift" considered taxable income to the recipient?


N

NadCixelsyd

If Adam gives Jane ten dollars, is it considered taxable income to
Jane?

If Jane is a waitress and Adam is a customer, that's obviously income,
but what about these circumstances ...

This question was inspired by Breaking Bad TV episode. Suppose Jane
has cancer and puts up a web site asking for donations to cover her
medical expenses. Would it make any difference if Jane spent the
money on a trip to Las Vegas instead?

Suppose Jane has developed a software program that is free, but
donations are accepted.

Suppose Jane is a panhandler on the street. (Disregard the fact that
she has 0% chance of filing a return)

Any other gift scenarios that you can think of?

And while I'm discussing tip income ... Besides waiters, who else is
required to report tips to the employer? I usually tip for furniture
delivery into the house. How about dealers in Vegas? Newspapermen
and postal workers at Christmas?
 
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S

Stuart A. Bronstein

NadCixelsyd said:
If Adam gives Jane ten dollars, is it considered taxable income
to Jane?
Not normally.
If Jane is a waitress and Adam is a customer, that's obviously
income, but what about these circumstances ...

This question was inspired by Breaking Bad TV episode. Suppose
Jane has cancer and puts up a web site asking for donations to
cover her medical expenses.
That would be a gift, because it's not given in exchange for
anything.
Would it make any difference if
Jane spent the money on a trip to Las Vegas instead?
No.

Suppose Jane has developed a software program that is free, but
donations are accepted.
It's in exchange, so it's taxable.
Suppose Jane is a panhandler on the street. (Disregard the fact
that she has 0% chance of filing a return)
She gives nothing in return, so it's not taxable.
 
A

Alan

On 10/15/2011 6:46 PM, Stuart A. Bronstein wrote:

[snip]
She gives nothing in return, so it's not taxable.
Unless Jane's trade is panhandling.
 
P

Pico Rico

Stuart A. Bronstein said:
Not normally.


That would be a gift, because it's not given in exchange for
anything.


No.
well, that would be fraud. Not sure if that affects the taxability of that
money to her.

It's in exchange, so it's taxable.


She gives nothing in return, so it's not taxable.
She stops pestering you for money. So, that is an exchange and thus
taxable.
 
S

Stuart Bronstein

Pico said:
well, that would be fraud. Not sure if that affects the taxability of that
money to her.
If she actually has cancer, how could that be fraud? She asks for
donations because she's sick, she gets donations. She can use the
money for whatever she wants.
She stops pestering you for money. So, that is an exchange and thus
taxable.
So every time your wife asks you for some cash, that's a taxable
event? I doubt it.
 
M

Mark Bole

On 10/15/2011 6:46 PM, Stuart A. Bronstein wrote:

[snip]
She gives nothing in return, so it's not taxable.
Unless Jane's trade is panhandling.
But, could that activity rise to the level of a trade or business?

I don't see much difference between "panhandler" and "beggar", and I
don't think either would be a trade or business. The fact that a gift
was requested by the donee does not change its nature as a gift.

"beggar - one that begs; especially : a person who lives by asking for
gifts " [Merriam Webster]
 
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P

paultry

On 10/15/2011 6:46 PM, Stuart A. Bronstein wrote:

[snip]
Suppose Jane is a panhandler on the street. (Disregard
the fact
that she has 0% chance of filing a return)

She gives nothing in return, so it's not taxable.
Unless Jane's trade is panhandling.
But, could that activity rise to the level of a trade or
business?

I don't see much difference between "panhandler" and
"beggar", and I don't think either would be a trade or
business. The fact that a gift was requested by the donee
does not change its nature as a gift.

"beggar - one that begs; especially : a person who lives by
asking for gifts " [Merriam Webster]
"Trade or Business" Defined (by IRS):

"The term trade or business generally includes any activity
carried on for the production of income from selling goods
or performing services."

http://www.irs.gov/charities/article/0,,id=158841,00.html

Don't see what goods or services a beggar or panhandler
would provide. One's wife, on the other hand.....
 
A

Alan

On 10/15/2011 6:46 PM, Stuart A. Bronstein wrote:

[snip]
Suppose Jane is a panhandler on the street. (Disregard the fact
that she has 0% chance of filing a return)

She gives nothing in return, so it's not taxable.
Unless Jane's trade is panhandling.
But, could that activity rise to the level of a trade or business?
Yes, if that is how you earn your livelihood. Panhandling is the way
many individuals earn their livelihood. Panhandling rises to the level
of being self-employment income when it is the way one earns his/her
livelihood.

I don't see much difference between "panhandler" and "beggar", and I
don't think either would be a trade or business. The fact that a gift
was requested by the donee does not change its nature as a gift.

"beggar - one that begs; especially : a person who lives by asking for
gifts " [Merriam Webster]
 
S

Seth

^^^^^^^^^^^^^^^^^^^^^^^^^^


If she actually has cancer, how could that be fraud?
Because she promised one thing and did another.
She asks for donations because she's sick,
She asked for donations to cover her medical expenses, and she didn't
use them to cover her medical expenses.
she gets donations. She can use the
money for whatever she wants.
Despite getting them based on the claim she'd use them for her medical
expenses?

Seth
 
B

Bill Brown

On 10/15/2011 6:46 PM, Stuart A. Bronstein wrote:
Suppose Jane is a panhandler on the street. (Disregard the fact
that she has 0% chance of filing a return)
She gives nothing in return, so it's not taxable.
Unless Jane's trade is panhandling.
But, could that activity rise to the level of a trade or business?
Without a doubt.

I don't see much difference between "panhandler" and "beggar", and I
don't think either would be a trade or business. The fact that a gift
was requested by the donee does not change its nature as a gift.
I don't either. Either or both could be engaged in as a trade or
business.
"beggar - one that begs; especially : a person who lives by asking for
gifts "  [Merriam Webster]
For our purposes, Merriam Webster does not define, "gift." Congress
does.
 
N

NadCixelsyd

That would be a gift, because it's not given in exchange for
anything.
If I won a prize on "Deal or No Deal", that's not given in exchange
for anything. OK, I was on the show for the express purpose of
winning money, so the contestant could be considered an employee and
therefore not excludable under section 102.

But what about those people who were given cars by Oprah? They were
in the audience without any expectation of gain. The IRS deemed the
cars to be taxable?
 
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S

Stuart Bronstein

NadCixelsyd said:
If I won a prize on "Deal or No Deal", that's not given in exchange
for anything. OK, I was on the show for the express purpose of
winning money, so the contestant could be considered an employee and
therefore not excludable under section 102.
Not an employee, but it's certainly not a gift. You perform services
(act as a contestant) and get something in return, so it's taxable.
But what about those people who were given cars by Oprah? They were
in the audience without any expectation of gain. The IRS deemed the
cars to be taxable?
Oprah could have treated it a couple of different ways. She could
have treated the cars as personal gifts, not deducted the costs from
her own income tax, and they would not have been taxable to the
recipients.

My understanding is that she didn't do that. She treated them as
corporate gifts and deducted them. Corporations can give gifts and
deduct them up to $25 per person the last time I checked. If the gift
is more, it's taxable to the recipient.
___
Stu
http://DownToEarthLawyer.com
 
P

Pico Rico

NadCixelsyd said:
If I won a prize on "Deal or No Deal", that's not given in exchange
for anything. OK, I was on the show for the express purpose of
winning money, so the contestant could be considered an employee and
therefore not excludable under section 102.

But what about those people who were given cars by Oprah? They were
in the audience without any expectation of gain. The IRS deemed the
cars to be taxable?

oh no - not THIS thread again!
 
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A

Alan

If I won a prize on "Deal or No Deal", that's not given in exchange
for anything. OK, I was on the show for the express purpose of
winning money, so the contestant could be considered an employee and
therefore not excludable under section 102.

But what about those people who were given cars by Oprah? They were
in the audience without any expectation of gain. The IRS deemed the
cars to be taxable?
See the Dec. 2010 thread "are gifts received on TV shows free".
 

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