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Lev
Lev, Tax Advisor
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These questions relate to gifts that can be given that are

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These questions relate to gifts that can be given that are not applicable against the annual $14K exclusion. I am not concerned with deductibility.

1.Adult Grandchild is in college. Grandparents want to pay ALL expenses not covered by the 529.
Can they, or is paying for the college grandkid's regular expenses (groceries, hair, gym, taxi, pet) all ones that either have to have gift tax paid on and/or are income to the adult child?

Is this different if the grandparents give the adult child a credit card such that the grandparent is paying the credit card bill directly, or is it still dependent upon the specific charges?

2. Same question for grandkid in highschool (minor for one more month).

3. Does any of this change if the children have diagnosed disorders they are being treated for?
One has ADHD and Depression
One has Aspergers, Depression, Kyphosis, and attempted S.

4. Are there any household expenses other than medical and tutoring Grandparent can pay as contribution to household expenses for adult grandkid's parent (ie. grandparent's child) a. For instance, any rent if children CANNOT share a room for psychological reasons?
a. For kid with Asthma, can Parent pay for housekeeper necessary to keep dust down?

5. Are there any circumstances by which a Grandparent can pay an adult grandkid's auto expenses (e.g. not safe area to take a bus to school, needs to go to therapy daily etc).

Lev :

Hi and welcome to Just Answer!
1.


As a recipient of the gift (or inheritance) - the person does not need to claim it as income. Regardless of the value. Please see for reference IRS publication 525 page 31 (left column) -http://www.irs.gov/pub/irs-pdf/p525.pdf


Gifts and inheritances. In most cases, prop­erty you receive as a gift, bequest, or inheri­tance is not included in your income.
That is for income tax purposes. That would be the donor who files form 709 - gift tax return - not recipients of the gift.
Gift in the form of paying living expenses are not excluded from taxable gift.
Refer to Form 709 , 709 Instructions.
The gift tax return is required when the total value of the gift is above $14,000 (for 2013) per person per year.
There will not be any gift taxes unless the lifetime limit of $5,250,000 (adjusted every year for inflation) is reached.
It doesn't matter how the gift is made. For gift transaction - as long as there is an intention to make a gift and the gift is accepted - the gift is considered as occurred.
2.
there is no difference.
3.
there is NO difference either.
For the gift to be excluded from taxable gift - it should be paid directly to educational or medical organization.
All other expenses paid for another person are considered as gift - and are only excluded if the total value is below $14,000 per person per year.
Lev :

4.
All expenses paid for another person regardless of relations would be considered as a gift - for gift tax purposes. Exemptions are only for those specifically exempted.
Please see IRS publication 950 for reference - http://www.irs.gov/pub/irs-pdf/p950.pdf
page 3 left column
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule.


Generally, the following gifts are not taxable gifts:


•Gifts, excluding gifts of future interests, that are not more than the annual exclusion for the calendar year,


•Tuition or medical expenses paid directly to an educational or medical institution for someone else,


•Gifts to your spouse,


•Gifts to a political organization for its use, and


•Gifts to charities.

Lev :

5.
The grandparent may pay any expenses for the child including auto expenses - that is not an issue.
However as long as such expenses are above annual threshold which is for 2013 $14,000 - the amount above would be considered a taxable gift. Still - none will be taxable for the recipient. The gift tax return is required when the total value of the gift is above $14,000 (for 2013) per person per year.
There will not be any gift taxes unless the lifetime limit of $5,250,000 (adjusted every year for inflation) is reached.

Customer:

Is tutoring handled the same as Tuition?

Lev :

Yes - if paid to a qualified educational institution.

Lev :

See the law section - http://www.law.cornell.edu/uscode/text/26/2503


(e) Exclusion for certain transfers for educational expenses or medical expenses
(1) In general
Any qualified transfer shall not be treated as a transfer of property by gift for purposes of this chapter.


(2) Qualified transferFor purposes of this subsection, the term “qualified transfer” means any amount paid on behalf of an individual


(A) as tuition to an educational organization described in section 170 (b)(1)(A)(ii) for the education or training of such individual, or


(B) to any person who provides medical care (as defined in section 213 (d)) with respect to such individual as payment for such medical care.

Lev :

see section 170 (b)(1)(A)(ii) here - http://www.law.cornell.edu/uscode/text/26/170


(ii) an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on,...

Just in case you were not able to use the chat - I am switching to Q&A mode and porting the answer below.
Please feel free to communicate if you need any clarification or have other tax related issues.

Is tutoring handled the same as Tuition?
Yes - if paid to a qualified educational institution.
See the law section - http://www.law.cornell.edu/uscode/text/26/2503
(e) Exclusion for certain transfers for educational expenses or medical expenses
(1) In general
Any qualified transfer shall not be treated as a transfer of property by gift for purposes of this chapter.
(2) Qualified transferFor purposes of this subsection, the term “qualified transfer” means any amount paid on behalf of an individual—
(A) as tuition to an educational organization described in section 170 (b)(1)(A)(ii) for the education or training of such individual, or
(B) to any person who provides medical care (as defined in section 213 (d)) with respect to such individual as payment for such medical care.
see section 170 (b)(1)(A)(ii) here - http://www.law.cornell.edu/uscode/text/26/170
(ii) an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on,...
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