Discussion:Tax on cash gifts received?
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Discussion Forum Index --> Tax Questions --> Tax on cash gifts received?
| 19 June 2007 | |
| I have a tax case that I need to solve for my class. Someone saved someone’s life and got a lot ofpublicity. Now he's receiving all kinds of rewards from all sorts of people. It is mostly $10 and 20 bills in enevelops. It totals to several hundreds. Does he have to pay tax?????
If you need additional information, please let me know. | |
| 19 June 2007 | |
| Give your instructor our congratulations. Understanding the answer to this question will give you a good basic foundation. | |
Michaelstar (talk|edits) said: | 19 June 2007 |
| Looks to me that your the one who needs to arrive at the answer to this question. Post your final answer after you have worked through your research or be voted off the island at tribal council....... | |
| 19 June 2007 | |
| any idea what sections i can refer to. I have seaching for days and have no answer. Please help. | |
| 19 June 2007 | |
| The gifts are not tax deductible to the donor nor taxable to the donee =) | |
| 19 June 2007 | |
Searching for days, eh? Perhaps this is not the field you should be interested in.
Sec. 74 Reg. 1.74-1(b) | |
| 19 June 2007 | |
| I respectfully disagree with the answers. I don't do homework for students. The client is not a tax exempt entity.
Rewards and prizes are taxable misc income. It's not a gift. | |
| 19 June 2007 | |
| Under § 102(a), a gift must proceed “from a ‘detached and disinterested generosity,’ ... ‘out of affection, respect, admiration, charity or like impulses.’” Commissioner v. Duberstein, 363 U.S. 278, 285 (1960), 1960-2 C.B. 428. On the other hand, payments that proceed “primarily from the ‘constraining force of any moral or legal duty’ or from ‘the incentive of anticipated benefit’ of an economic nature” are not gifts.
According to this section then, the cash received can be considered a gift because its cause is admiration and the receiver did not have any moral duty to save someones life. Right? | |
| 19 June 2007 | |
| Interesting. Then your position that payment from he whose life was saved would be income? | |
| 19 June 2007 | |
| Section 102(a) states that value of property acquired by gift is excluded from gross income. So just like Sec. 74, which says that prizes and awards of such nature should be excluded from gross income,in this case too the value is not considered income. However, Sec. 102 cannot be used for prizes and awards.
My question is, should the cash received be considered as a 'gift' or 'prizes and awards'. This will decide which section should be explained in my paper. I am confused how to differentiate a gift from a prize or award. | |
| 20 June 2007 | |
| Additional information, this person can now also apply for financial aid at ivy tech. He may also receive a free trip to disney land. | |
| 20 June 2007 | |
| It doesn't qualify as an award under Sec. 74 since this is not part of a "contest or proceeding." More importantly look at Sec. 74(b)(3). The prize or award must be transferred to a "governmental unit..." or else it is includable in gross income under 74(a).
Re-read Duberstein. "The transferor's intention is the most critical consideration." Did the people who sent our hero money intend for the rewards to be gifts or were they looking for something in return? | |
