Discussion:Adoption Credit allowed if taxpayer received funds from non-profit or church?
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Discussion Forum Index --> Basic Tax Questions --> Adoption Credit allowed if taxpayer received funds from non-profit or church?
Discussion Forum Index --> Tax Questions --> Adoption Credit allowed if taxpayer received funds from non-profit or church?
| 20 August 2009 | |
| If a taxpayer receives funds from a non-profit or from their church directly to the taxpayer for the purpose of adopting a child, would the taxpayer still be eligible for the Adoption Credit?
I was told by NATP that if the funds go directly to the adoption agency, then no credit for the taxpayer, but if the funds go directly to the taxpayer, and are under control of the taxpayer (deposited in his checking account for instance) and then the taxpayer spends those funds on the adoption, that the taxpayer should claim the Adoption Credit. How say you? | |
| 20 August 2009 | |
| aren't you asking the same question as my client who says
"But I've got a receipt that says 'paid'. The IRS doesn't know who paid it, why can't I deduct it?" Of course, he isn't talking about one receipt, but a pile of cash receipts he picked up in the parking lot at Lowes. | |
| 21 August 2009 | |
| The statute forces the taxpayer to reduce the amount of the credit by any subsidies received from any federal, state, or local program. Not sure that the reduction is required for subsidies received from churches or non-governmental agencies. | |
| 21 August 2009 | |
| Interesting, Riley. Kevin -- if a relative gives you money, that money is a gift and now belongs to you. How you spend it is your business, since money is a fungible commodity. You can spend it on a new kitchen makeover (not deductible, but added to your home's basis) or you could adopt a child with it. The credit would be available in that case, wouldn't it? In your example of money found in parking lot, the money is of course taxable income, so yes, you pay the tax AND still claim the adoption credit. But a gift is non-taxable and can be used in any manner they wish, thus preserving the eligiblity for the credit. Yes, if the taxpayer is trying to use a receipt from the adoption agency, but the bill was paid directly by the non-profit on behalf of the taxpayer, then I don't see how they could be eligible for the adoption credit. A fine distinction, but perfectly legal.
Riley, I wonder if the subsidy from the church or non-governmental agency is considered a "local program"? Has anyone wondered what the tax results would be if the taxpayer borrowed money to pay for the adoption and then the church or non-govrnmental agency reimbursed them for the costs? | |
| 21 August 2009 | |
| Take a look at the Sec. 23(b)(3) double benefit rules. If the funds come from the taxpayer's employer or a federal, state, or local governmental agency, the double benefit rules kick in. | |
Ksnoopytax (talk|edits) said: | 21 August 2009 |
| Section 23(d)(1)(D) says
"The term “qualified adoption expenses” means reasonable and necessary adoption fees, court costs, attorney fees, and other expenses— which are not reimbursed under an employer program or otherwise." The instructions for Form 8839 page 1 say, "Qualified adoption expenses do not include expenses paid by your employer or reimbursed by any other person or organization" | |
| 21 August 2009 | |
| Ok that is very helpful, thank you! -- but would it be considered a reimbursement if the money went directly to the taxpayer, who in turn spends the money on adoption expenses? 23(d)(1)(D) does not seem to address that scenario. | |
| August 21, 2009 | |
| I'd read that one very conservatively, Illini. This is one where you're asking the FED to hand money over via a credit. I wouldn't want to do that when it's not their money, based on KSnoop's find. | |
| 21 August 2009 | |
| If it's paid directly to a taxpayer as a gift. Completely unrestricted. Then, it would seem to me to be legitimate. If the church says that something is a reimbursement, then, to me, it's not really a "gift" in this sense of the word. After all, the credit itself serves as a kind of reimbursement. | |
| August 21, 2009 | |
| Excellent point, Crow, Especially this late into the day, or early into the evening for you....! | |
| 21 August 2009 | |
| It's the kids that inspire me JR1; it made a lasting impression on me to see Opie bringing Otis his meals behind bars. | |
| 21 August 2009 | |
| Illini, it appears that 232(d)(1)(D) would apply to any reimbursement of adoption expenses, regardless of whether the reimbursement is paid to the taxpayer or not. | |
| 21 August 2009 | |
| Illini, your first sentence says "directly to the taxpayer for the purpose of adopting a child". If they weren't adopting a child, then they wouldn't have been paid, so I call this a reimbursement by another organization and not qualified. | |
| 16 September 2009 | |
| A little late into the discussion, but how about the church? I had a church call and ask if donations to a family for adopting would be deductible. I said no, unless they are paid to the adoption agency directly and the agency credits the family with whatever amount for adoption. In this case, there is no double benefit if the church is giving money to the adopting family (technically as a gift) but no donation allowed to the original donor??? | |
