Crowdfunding has grown in the last 20 years raising billions of dollars from hundreds of projects being launched on a daily basis. Crowdfunding is the practice of soliciting financial contributions from a large number of people over the internet. These contributions can be used for a verity of projects. By doing this individuals and organizations can gain access to funds outside of the traditional sources like banks.
Lets say you were involved in a terrible crash and needed to raise money to cover expenses so your sister opens a GoFundMe account online. You raise enough money thinking its a tax free gift. You don’t report the income on your tax return. Later on the IRS says you owe money in taxes, consisting of back taxes, penalties and interest.
So is the money you receive from a GoFundMe fundraising campaign taxable income or tax free as a gift? Money raised in a GoFundMe account for the benefit of someone in need isn’t deductible as a charitable contribution. That shouldn’t effect whether the funds raised are taxable to the recipient. For another example think of a parent, parents aren’t a tax exempt charity. Yet there is no question that cash gifts from a parent to a child are tax free to the child. A GoFundMe account meets the definition of gifts under the Internal Revenue Code and would not be taxable to the recipient. But that doesn’t mean every donation qualifies as a gift. This is seen differently depending on what the donations are for. Money raised to support a profit motive, such as business are taxable to the recipient. But donations made to support disadvantaged individual would be considered a tax-free gift.
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You could be subject to a gift tax if you give a non-spouse a gift valued in excess of the annual exclusion amount.
For 2016 the annual federal gift tax exclusion amount for gifts to a non-spouse is still $14,000 per person, per year. If you are married, you and your spouse may give up to $28,000 per person, per year, free from federal gift tax. Although there are no immediate tax concerns for the recipient of a gift tax because federal gift tax is imposed upon the donor, the recipient could be liable for capital gains tax in the cash to computerfuture.
Highly appreciated gifts such as real estate or stocks will render the recipient liable for capital gains tax when he or she decides to sell the gift at a later date.
The general rule is that the recipient’s basis in the gifted property is the same as the basis of the donor. For example, if you were given stock that the donor had purchased for $10 per share and you later sold it for $100 per share, you would pay tax on a gain of $90 per share.
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Charitable contributions are donations or a gift to or for the use by a qualified organization. It is voluntary and made without getting or expecting to get anything of equal value.
Qualified organizations are nonprofit groups that are religious, charitable, educational, scientific or literary in purpose or that work to prevent cruelty to children or animals. In order for donations to be tax deductible the organization has to be qualified. Note: Gifts to individuals are never deductible as charitable contributions even if the individual is associated with a charitable organization.
If the receipient of funds received uses the money for medical expenses, the receipient can deduct the cost of medical expenses within IRS tax guidelines. Fund used to help pay for other personal expenses are not deductible. There is no tracing rule under the IRC section 213 that requires tracing the source of the funds to some taxable source before being able to deduct the expense as a medical expense.
Source: The Tax Book Photo:Pexels
Saying that Las Vegas offers a wide variety of entertainment choices is saying a lot. From touring hotel and casino bright lights to getting your picture taken with Elvis at the “Welcome” sign; to dining and watching the best entertainment offered or enjoying the local ballet company to spending an afternoon at the Smith’s Center with a Broadway show or hanging out at the ballpark with the Area 51s there is certainly a lot to choose from.
Which brings me to the point, is a gift of tickets to a customer itemized as a business gift or an entertainment expense?
In a nut shell, when a business provides a customer with event tickets the tax treatment depends on whether an employee of the corporation attends the event with the customer.
Giving tickets without attending with your customer the costs may be treated as a business gift or as entertainment. But if an employee attends, the tickets are considered entertainment.
The rewards of customer loyalty greatly exceed the cost of a simple thank you especially when it is said, “Vegas style.” Whether you attend and enjoy with them is your choice.
Be Tax Advantageous and choose wisely.
Rhonda A. Mannes,