The U.S. Supreme Court has said that a gift is tax-free to the recipient only if it “proceeds from a detached and disinterested generosity . . . out of affection, re-spect, [etc., as quoted in your textbook].” That easily means that most intra-family gifts are tax-free, equally easily that most occurring in a business setting are tax-able (as disguised compensation). But are some “gifts” more “gray-area”…???

Assume that a young person comes to you, a CPA, and explains that, in addition to W-2 income, s/he received almost $50,000 during 2019 for “dating” certain more mature – and more financially secure – individuals. “But really, I was just ‘arm-candy’ and good conversation, that’s all!” s/he says, adding “But I liked all of them, otherwise we wouldn’t have dated.”

Do you believe that you would need to dig a little deeper, ask some due-diligence questions to get additional facts? Or, on the face of this story, would you already be perfectly satisfied that the $50,000 would not have to be included when you prepared this person’s 1040? Why?

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According to the US Supreme court making a gift or leaving your estate to the heirs does not ordinar... View the full answer