Go Fund Me Accounts

[Vanessa]

I have a client who someone set up a go fund me account for his medical expenses. He has a brain tumor. Is any of the money taxable from the go fund me account?

[Matt Sova]

Go fund me

http://taxprof.typepad.com/taxprof_blog/2015/04/irs-seeks-to-tax-50k-.html

This is an interesting story. Not sure how it turned out. If it was my client I'd fight the IRS tooth and nail, because they are basically all gifts. That's my opinion anyway, not sure how others feel.

[Roland Slugg]

The amounts received would certainly seem to be nontaxable gifts, and Go Fund Me's web site offers the same opinion. The IRS, however, sees it differently, or at least it has in some cases.

Crowdsourcing donation appeals are a new kind of funds solicitations, and the tax status of funds received in that manner is unresolved. It's unlikely there has ever been a tax court case on point, but there probably will be one fairly soon. I would not be surprised if the courts rule that such receipts are taxable, reasoning that the income was the result of the recipient's affirmative request for contributions.

I would advise a client to be cautious and, frankly, I'm not sure what I would do if I had one who was doing this.

I can see the ad already: "Have car ... have house ... want yacht. Please send money."

[Gretel]

Third Party

My understanding is that a third party is setting up a fund raiser for someone in need. One could also view this as this third party person being the real giver even though he might not give any money himself. It's no different then all the small fund raisers (Churches, bars, etc.) in my town if people are in need - death, accident, sickness. That certainly is not taxable.

[taxea]

My understanding is that a third party is setting up a fund raiser for someone in need. One could also view this as this third party person being the real giver even though he might not give any money himself. It's no different then all the small fund raisers (Churches, bars, etc.) in my town if people are in need - death, accident, sickness. That certainly is not taxable.

Neither is it a qualified donation if it is given for the benefit of a specific person.

[mactoolsix]

From a recent Spidell webinar:

Funds raised through Kickstarter, Indiegogo, PROfounders, and other such websites is either
income, a capital investment, or a gift.

Funding a charitable event
Many crowdfunding projects are designed to raise money to pay for an individual’s medical
expenses, funeral expenses, or for families in crisis.

For the donor, the contribution is a nondeductible gift (unless the contribution is to an IRC §501(c)(3)
organization). The gift would be subject to gift tax.

Some crowdfunding sites are partnering with 501(c)(3) organizations to provide a tax deduction
to the donor. For example, Indiegogo partnered with Fractured Atlas, a nonprofit organization to
provide a tax deduction for individuals funding an art project.

If the contribution is subject to gift tax, it would seem that the amount would not be income to
the recipient.

The IRS has not opined on the taxation of contributions received nor the deduct-ability of
expenses.


My thoughts - do the medical expenses exceed the income?

Mike

[Gretel]

Neither is it a qualified donation if it is given for the benefit of a specific person.

This discussion is about taxable income or not to the recipient, not about tax deductibility.

[ATSMAN]

I seem to recall an analysis in one of the trade magazines that the recipient may consider it a gift and there is no tax deduction to the donor. Generally most if not all of the donations are below the gift tax filing threshold per donor.

Anyone have information that is contrary to this?

[kathyc2]

There was a local situation this year that made me curious how this works. There was over 800K raised and it was in the name of the business rather than owners. It seemed to be like it should be business income if "donated" to a business.