Childs Charitable Contributions

[OldJack]

2 comments:

Old Jack - I agree with most of what you posted but I'm not sure I like your version of "child". Child is defined in §152(f) as a son, a daughter, stepson or stepdaughter or an eligible foster child of the taxpayer. The son is a child even though now 22 years old.

Well.. I think you are misinterpreting code §152. The title of the code section is "Sec. 152. Dependent defined". I see no definition of child in that section but there is the definition of a dependent. And, code section 151(c)(3) defines a child for purpose of exemption:

quote= >>Sec. 151. Allowance of deductions for personal exemptions
(3) Child defined
For purposes of paragraph (1)(B), the term "child" means an
individual who (within the meaning of section 152) is a son,
stepson, daughter, or stepdaughter of the taxpayer.<<

However, the fact still remains that the NATP code §73 is not applicable since the issue is not about the status of dependent nor exemption, rather it is about:

quote= >> Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME

-HEAD-
Sec. 73. Services of child<<


And for code §73 to apply it is about parental right and duty. A parent has no right or duty for an adult offspring unless so stated by a court even if qualified to claim as a dependent and/or exemption.

My main objective in continuing this post was simply to point out that one opinion from NATP was no better or as good as opinions expressed by many on this professional tax forum. If I had to chose a debatable opinion, I would go with the majority opinion of tax pro's on this forum.

[jainen]

Don't misunderstand

>>My main objective in continuing this post was simply to point out that one opinion from NATP was no better or as good as opinions expressed by many on this professional tax forum<<

Don't misunderstand what I am about to say -- Old Jack and I are still safely on opposite sides of the question in the original post.

But we are both alike bothered by uncritical reliance on NATP research (and, for that matter, this forum as well). There are some serious problems with the single citation, and there are other issues raised by the NATP answer. Nice lady notwithstanding, any advice has to be considered in context with all the facts and the client's purposes.

[George Boutwell]

Insisto Viaticus

Tax reference materials are generally arranged by Code section, because almost every question can be plugged in to one or more of them. Learning how the Code is organized and arranged, is the first major step to expertise in research.

Almost every question -- but not quite all of them. That's why comprehensive references have information listed under such topic headings as "Who Is The Taxpayer," the question here.

Many of those questions revolve around a determination of the facts. If the issue goes before a judge, IRS's lawyers can question the taxpayer and bring out a lot of facts that have not been otherwise DISCLOSED. See the related post about what happens to practitioners, not when they take an unreasonable position, but when they take an undisclosed position (even when they don't recognize that one exists).

There is no penalty for not disclosing all the facts on an Internet message board, or in a phone call to NATP. The purpose of asking in both places, should be to seek suggestions on additional questions that the practitioner needs to ask the client, before IRS gets a chance to do it.

In this thread, there are still many more unknowns than knowns. What does the son do with his paycheck? How does the money get delivered to the church? How much money do the parents give the son? How do they do it -- cash, or bank deposit? Do the parents attend church with the son?

A lot of this is basic accounting and auditing procedure, leading to the discovery of facts to which the law will then be applied. Follow the money, as the late, great Senator from North Carolina would say.

[erchess]

The bottom line

that I take away from this discussion is that whether the parent may claim the child's contribution in this case is open to debate. I question the wisdom of deducting $500 when whether one may do do is open to debate. If the amount were large enough I would take the questionable deduction and stand by for a court fight.

[George Boutwell]

If the amount involved was more than the rodent's patootie we have in this case, it would be worth more than just a theoretical debate. If the parents get audited, it's not likely to be over the last $500 in charitable contributions, and if that amount is claimed it's just something to concede so that the larger issues can be won.

[Bees Knees]

The NATP code cite has nothing to do with this case since this "child" is clearly an adult whereas the code is clearly for a child. Note §73(c) where the defined "parent" has to have "parental rights and duties " for this code to apply. A parent has no rights or duties for an adult offspring unless a court has awarded such rights. Therefore, code §73 does not apply to this case and NATP was incorrect to cite it, but then they had to give you something since that is their job. I'll bet the researcher for NATP doesn't have as much tax experience as you do.

I think you are making a mountain out of a mole hill. If Section 73 does not apply to this case because the child is an adult and no court has awarded the parent parental rights and duties, then the parent would clearly not be able to deduct an expense incurred by another taxpayer, and the NATP answer is correct. If Section 73 does apply because the adult child is disabled and under the supervision and care of the parents, then the NATP answer is correct.

Either scenario, the nice lady at NATP got it correct, and you are nit picking the answer because the citation may or may not apply. The code gives no further explanation as to what constitutes parental rights and duties. It does not say a court order is needed. There are no regs to explain it. Therefore, your assumption that a court order is needed for Section 73 to apply is no better supported than the position NATP took in assuming Section 73 to apply, which is all irrelevant anyway since either way, the parents cannot claim the charitable contribution deduction.

…unless the child first gifts the money to the parent under a legitimate gift arrangement, and the parent in turn makes the contribution.

Have we beaten this issue to death yet?

[OldJack]

Either scenario, the nice lady at NATP got it correct, and you are nit picking the answer because the citation may or may not apply.

Have we beaten this issue to death yet?

I agree that we have made a mountain out of a mole hill with code §73(b) since NATP should not have cited the section. NATP was given the fact that this offspring was a 22 year old adult in the very first sentence of the question. True, NATP was asked to expand on when it might be deducted and code §73(b) could be applicable in a minor child case but that was not made clear as there was no cite of code §73(c) from NATP.

Again, my main point in this thread was not code §73, rather that one opinion is only one opinion regardless of who gives the opinion. Its not rocket science to conclude that many opinions are usually better then one (unless of course the one opinion is mine).

After all, NATP was asked if the parents could deduct the charitable contribution. A more appropriate code cite from NATP should have been the code cite posted in this thread from Bees Knees:

"A taxpayer can deduct medical expenses paid on behalf of a dependent [Section 213(a)]. There is no similar language in Section 170(a)(1) for charitable contributions.