Originally posted by EA Carol
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I think the answer to the more general question is "it depends". I think it would depend on state law and the age of the minor child. The Courts have held for many years that the first component of a valid gift is a COMPETENT donor. State law would probably determine when a child is considered competent. I don't know how old the children are in Uncle Sam's post but I get the feeling they may be too young under NY law to be considered competent donors.
Compentency of the donor is only the FIRST component. Other components include delivery, acceptance, divestment of control by the donor and no consideration.
The Courts have also looked at the substance of the "gift". I'm pasting a snip from an old TC case Royce 18 TC 761. The case deals with both gift and income issues. It is, obviously, not completely on point. The sole reason to post it is to show that what is called a gift may not be a gift in the statutory sense. The substance of a transaction controls
[start]It is axiomatic that the reach of the income tax law is not to be circumscribed by refinements of legal title. The rule finds expression in the oft repeated admonitions that taxation is an intensely practical matter, concerned with economic realities; that tax consequences flow from the substance of a transaction rather than from its form; and that command over property or enjoyment of its economic benefits marks the real owner for income tax purposes. ...
In view of all the circumstances, we conclude that, despite its formalities, the gift by petitioner to his parents was not absolute and irrevocable. The petitioner's intent to have the income and property returned to himself and his family rather than vest irrevocably under the control of his parents, deprives the gift of validity for our purposes[end]
One other note for Carol - remind mom that if she takes the conservatorship fee, she has taxable income.
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