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Question about a Revenue Ruling vs. Qualified Relative blaha 01-17-2008
Posted by blaha on January 17, 2008, 11:42 pm
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 OK, here's the issue.
An individual is a qualified relative. Not a member of the household,
but receives support from a relative. The individual has no other
income, and does not file income taxes. My understanding would be
that money provided to this individual would be considered support,
not a gift. That's the whole point of being a qualified relative.
But, I then got a hold of a Revenue Ruling :

Rev. Rul. 54-343, 1954-2 CB 318

1939 IRC Sec. 1002 Regulations 108, Section 86.8: Transfers for a
consideration in money or money's worth.
Headnote:
Rev. Rul. 54-343, 1954-2 CB 318 [CAUTION: This Rev Rul has been
amplified by Rev Rul 82-98, 1982-1 CB 141.]
Reference(s):
Medical and hospital bills paid by a taxpayer for his adult son and
living expenses advanced to the son's family, including monthly
payments to cover the mortgage on the son's residence and automobile,
for no consideration other than the taxpayer's love and affection,
constitute gifts within the meaning of section 1002 of the Internal
Revenue Code.
Full Text:
Advice is requested whether medical and hospital bills paid by a
taxpayer for his adult son and living expenses advanced to the son's
family, including monthly payments to cover the mortgage on the son's
residence and automobile, for no consideration other than love and
affection, constitute gifts for the purpose of the Federal gift tax.
In the instant case, the father has no responsibility for the support
of his adult son.
Section 1002 of the Internal Revenue Code reads as follows:
Where property is transferred for less than an adequate and full
consideration in money or money's worth, then the amount by which the
value of the property exceeded the value of the consideration shall,
for the purpose of the tax imposed by this chapter [chapter 4 of the
Code], be deemed a gift, and shall be included in computing the amount
of gifts made during the calendar year.
Section 86.8 of Regulations 108 provides in pertinent part that the
transfers reached by the statute are not confined to those only which,
being without a valuable consideration, accord with the common law
concept of gifts, but embrace as well sales, exchanges, and other
dispositions of property for a consideration in money or money's worth
to the extent that the value of the property transferred by the donor
exceeds the value of the consideration given therefor. However, a
consideration not reducible to a money value, as love and affection,
promise of marriage, etc., is to be wholly disregarded, and the entire
value of the property transferred constitutes the amount of the gift.
Accordingly, it is held that medical and hospital bills paid by a
taxpayer for his adult son and living expenses advanced to the son's
family, including monthly payments to cover the mortgage on the son's
residence and automobile, for no consideration other than the <Page
319> taxpayer's love and affection, constitute gifts within the
meaning of section 1002 of the Internal Revenue Code.


Now, this Ruling does not mention if the individual is a qualified
relative, so I'm wondering if that is the difference.
Or - is this saying that even though a person is a qualified relative,
support given to that individual is considered a gift?

Any help or opinions would be appreciated.

--
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Posted by Arthur Kamlet on January 17, 2008, 11:53 pm
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>OK, here's the issue.
>An individual is a qualified relative. Not a member of the household,
>but receives support from a relative. The individual has no other
>income, and does not file income taxes. My understanding would be
>that money provided to this individual would be considered support,
>not a gift. That's the whole point of being a qualified relative.
>But, I then got a hold of a Revenue Ruling :


Well, nothing you posted here indicates the child is a dependent.



Or a QR.

Gifts to dependents may well be for their support.


And had the money paid for medical been paid directly to the
medical provider instead of to the kid, it would not have been
a gift at all.
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by blaha on January 18, 2008, 7:34 pm
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> Well, nothing you posted here indicates the child is a dependent.
>
> Or a QR.
>
> Gifts to dependents may well be for their support.
>
> And had the money paid for medical been paid directly to the
> medical provider instead of to the kid, it would not have been
> a gift at all.
> --
>
> ArtKamlet  at  a o l dot c o m  Columbus OH  K2PZH

Person is definately not a dependant child; too old.
But by my understand they are a dependant relative. (Blood relative,
no other income)
As such, I would have thought that any money given for general living
expenses could be support and not a gift, but this revenue ruling
implies otherwise. The next post has a point, maybe this ruling,
being before the IRS defined Qualified Relative, is now obsolete.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Alan on January 18, 2008, 7:38 pm
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Arthur Kamlet wrote:
>> OK, here's the issue.
>> An individual is a qualified relative. Not a member of the household,
>> but receives support from a relative. The individual has no other
>> income, and does not file income taxes. My understanding would be
>> that money provided to this individual would be considered support,
>> not a gift. That's the whole point of being a qualified relative.
>> But, I then got a hold of a Revenue Ruling :
>
>
> Well, nothing you posted here indicates the child is a dependent.
>
>
>
> Or a QR.
>
> Gifts to dependents may well be for their support.
There are a variety of rulings on this point. I.e., gifts are
counted as support as long as the item meets the definition of
support. I remember one ruling that dealt with the gift of a TV
to a child. The fair market value of the gift was used as
support for the child. I can't remember if it fell into the
"entertainment" or "education bucket.
>
>
> And had the money paid for medical been paid directly to the
> medical provider instead of to the kid, it would not have been
> a gift at all.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by blaha on January 18, 2008, 8:42 pm
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> Arthur Kamlet wrote:
> > In article
> >> OK, here's the issue.
> >> An individual is a qualified relative.  Not a member of the household,
> >> but receives support from a relative.  The individual has no other
> >> income, and does not file income taxes.  My understanding would be
> >> that money provided to this individual would be considered support,
> >> not a gift.  That's the whole point of being a qualified relative.
> >> But, I then got a hold of a Revenue Ruling :
>
> > Well, nothing you posted here indicates the child is a dependent.
>
> > Or a QR.
>
> > Gifts to dependents may well be for their support.
>
> There are a variety of rulings on this point. I.e., gifts are
> counted as support as long as the item meets the definition of
> support. I remember one ruling that dealt with the gift of a TV
> to a child.  The fair market value of the gift was used as
> support for the child. I can't remember if it fell into the
> "entertainment" or "education bucket.
>
>
>
> > And had the money paid for medical been paid directly to the
> > medical provider instead of to the kid, it would not have been
> > a gift at all.
>
> --
> << ------------------------------------------------------- >>
> << The foregoing was not intended or written to be used,   >>
> << nor can it used, for the purpose of avoiding penalties  >>
> << that may be imposed upon the taxpayer.                  >>
> <<                                                         >>
> <<   The Charter and the Guidelines for submitting posts   >>
> <<  to this newsgroup as well as our anti-spamming policy  >>
> <<                  are atwww.asktax.org.                 >>
> <<         Copyright (2007) - All rights reserved.         >>
> << ------------------------------------------------------- >>- Hide quoted
text -
>
> - Show quoted text -

Let me tell you what I learned from the expert. Any comments that
> anyone else may have would be appreciated.
>
> First, Income taxes and Gift taxes are totally seperate, and just
> because you are a qualified relative does not mean that the legal
> support you receive is not subject to gift tax. In fact, the IRS
> states that any support given to an individual you are not legally
> obligated to support is considered a gift. Taking this to the
> extreme, once my son turns 18, I am not legally required to support
> him. There is an exemption for medical and tuition bills paid
> directly, but anything else is considered a gift. Books, supplies,
> room and board at college, and the fair market value of staying at
> home during the summers is a gift to a child over 18. To the extent
> that the value is over $12k a year, it is subject to gift tax. Would
> the IRS enforce this extreme? Probably not. But, just because you
> are a qualified dependant/relative, support provided to you can be
> considered a gift.
> Quite a new understanding I have on this.
>
> If anyone disagrees or can elaborate, please do!
>

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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