Donations Received, not taxable?

[DaveinTexas]

I just wanted to make a few statements regarding what happened recently to a friend of a friend. His name is Paul Young and he was injured severely working as a foreman at a very large local railroad company. During a routine maneuver, he fell between 2 cars and lost both of his legs and an arm. He survived, miraculously, and now he is relying on the support of his family, his wife and 2 young children.

The local community is really showing their support and trying to help out with his pending medical bills, etc. Chick-Fil-A donated a day's worth of profits to his family's fund, a local community event is donating profits from a 5K run and the local Wells Fargo Bank setup the family fund that anyone can contribute to.

My assumption is these funds his family receives will not be taxable (that's the last thing they need is to be selected for audit and the IRS hammer them for not reporting these monies). He is not performing services but some of the money, no doubt, will go towards replacing his income that the disability payments won't cover. Also, there is no non-profit org. setup for his benefit so the people that donate will get no tax benefit. I've heard that even if one was setup that it would still not allow the donors to receive a tax deduction; that sort of makes sense.

Does anyone have any sites/experience with this kind of situation? I may have the privilege of preparing this young man's tax return for next year and I'd like to have my ducks in a row.

TIA and say a quick prayer for the Young Family if you will; I can't imagine what is going through his mind.

[Uncle Sam]

Donations

Before I respond with a thought - doesn't the man's employer have a disability plan when the worker gets disabled on the job? SSI Disability?

Better planning (hindsight is easier than foresight- I know that) would have expected some tax exempt organization like a church, veterans organization, employee union - to set up a fund for such a cause. While a non-501(c)(3) organization doesn't create a tax donation for the donor - it definitely would or should limit the taxability of the benefits to the recipient.

[erchess]

Why would there be a problem

If I give money to someone and there is no quid pro quo even implicitly, how can that be income to them?

I realize that donations to the benefit of a specific person are not deductible but honestly with the way rules are enforced in this country I think someone could set up a charity for the benefit of everyone in that county who has been run over by two railroad cars in the same incident and then discover that there is only one eligible recipient.

I join Uncle Sam in asking why he is not doing ok financially between what he gets from the company and what he gets from government sources.

[dsi]

I can give up to $13,000 and I won't have to pay any taxes on my gift. The recipient doesn't have to claim any of it as income. I can legally do this even if the recipient isn't a relative.

[jimmcg]

[QUOTE=dsi;122805]I can give up to $13,000 and I won't have to pay any taxes on my gift. The recipient doesn't have to claim any of it as income. I can legally do this even if the recipient isn't a relative.[/QUOTE

Agree, with no consideration involved this appears to be a gift. Not taxable to the recipient and not deductable to the donor. Possible, if structured properly and funneled through a non profit (501c3) that it could also be deductable to the donor. (may be too late for that now.)

[JON]

They

are gifts, noone will be getting a deduction for them, the $13,000 is of no worry to your injured guy. SSDI should be availiable, plus workman's comp, plus anything else the compnay may have.

[erchess]

And all the best

to this man and his family. I hope he will be able to find meaning in the rest of his life.

[DaveinTexas]

Thanks for the kind words

to this man and his family. I hope he will be able to find meaning in the rest of his life.

and the advice. I am sure he has short term, possibly even long term disability but these insurance programs are never adequate to cover one's entire salary. Most of you know that many people operate their finances paycheck to paycheck so even a small shortage of what you are accustomed to receiving can create a setback. Even if his spouse works she has probably taken a leave to tend to her husband so that cushion is probably gone as well.

I appreciate all of the comments. I hope the railroad company comes through with whatever program/benefits are available.

[KC-CPA]

Money received from Benefit for Individual

Read through this post because I have a similar situation. A teen-ager is now paralyzed and they through a benefit for him that raised $13,000. It was literally just a benefit thrown together to help out with expenses and to support the family. They deposited the money in the teen-agers savings account. No 501c involved. My questions are for those who have experience with this.

Should they have a separate bank account? What type of account should it be? I am thinking the account would be a good control of all money in and out. What else should they do regarding tracking and disbursing the money? Should they consider a trust or foundation?

The family really does not want to go through a lot of paperwork but from a benefit perspective it may pay them to, in some instances larger corporations may be contributing large amounts of money that I am sure they will want a charitable donation to. I wonder if they should consult an attorney to make sure to get disability correct.

Thanks.

[TAXNJ]

Yes

Read through this post because I have a similar situation. A teen-ager is now paralyzed and they through a benefit for him that raised $13,000. It was literally just a benefit thrown together to help out with expenses and to support the family. They deposited the money in the teen-agers savings account. No 501c involved. My questions are for those who have experience with this.

Should they have a separate bank account? What type of account should it be? I am thinking the account would be a good control of all money in and out. What else should they do regarding tracking and disbursing the money? Should they consider a trust or foundation?

The family really does not want to go through a lot of paperwork but from a benefit perspective it may pay them to, in some instances larger corporations may be contributing large amounts of money that I am sure they will want a charitable donation to. I wonder if they should consult an attorney to make sure to get disability correct.

Thanks.

Yes services of a Tax Attorney.

[Lion]

People made gifts to an individual. No deduction. Individual received gifts. No income. He should write thank-you notes.

[Super Mom]

Sounds like gifts to me, no one would have thought they could get a charitable deduction, especially chick fil a--they just wanted to help the family with a gift.

[TAXNJ]

2 posts

People made gifts to an individual. No deduction. Individual received gifts. No income. He should write thank-you notes.

Two posts same issue.

My response was to Roger N when looking toward the future when Roger N stated "....The family really does not want to go through a lot of paperwork but from a benefit perspective it may pay them to, in some instances larger corporations may be contributing large amounts of money that I am sure they will want a charitable donation to. I wonder if they should consult an attorney to make sure to get disability correct."


Some give gifts and get a thank you note and others give gifts and want a charitable deduction along with the thank you note.

[taxea]

I just wanted to make a few statements regarding what happened recently to a friend of a friend. His name is Paul Young and he was injured severely working as a foreman at a very large local railroad company. During a routine maneuver, he fell between 2 cars and lost both of his legs and an arm. He survived, miraculously, and now he is relying on the support of his family, his wife and 2 young children.

The local community is really showing their support and trying to help out with his pending medical bills, etc. Chick-Fil-A donated a day's worth of profits to his family's fund, a local community event is donating profits from a 5K run and the local Wells Fargo Bank setup the family fund that anyone can contribute to.

My assumption is these funds his family receives will not be taxable (that's the last thing they need is to be selected for audit and the IRS hammer them for not reporting these monies). He is not performing services but some of the money, no doubt, will go towards replacing his income that the disability payments won't cover. Also, there is no non-profit org. setup for his benefit so the people that donate will get no tax benefit. I've heard that even if one was setup that it would still not allow the donors to receive a tax deduction; that sort of makes sense.

Does anyone have any sites/experience with this kind of situation? I may have the privilege of preparing this young man's tax return for next year and I'd like to have my ducks in a row.

TIA and say a quick prayer for the Young Family if you will; I can't imagine what is going through his mind.

These are not donations-they are gifts. Anyone can give any other one 14K per year as a gift. If the gift from one person was more than 14K then use 14K of the gift for each member of the injured workers family.