Income Tax

39239

University of Idaho

1437 West A Street

Moscow, Idaho 83843

October 15, 2014

Xaviera Hollup

1379 Paradise Blvd., Apartment 13450

Hayden Lake, Idaho 83835

Dear Ms. Hollup:

I have received your request for advice on how to deal with the income tax consequences from your receipt of personal property and cash from Mr. Hissinger and other gentlemen friends. After reviewing your case I determined three different issues that need to be resolved. These include: the property received from Mr. Hissinger prior to his divorce, property received from the gentlemen friends that you formed relationships with, and the checking accounts set up by Mr. Hissinger once you started living together. To reconcile those issues I have looked at current income tax law and prior court decisions that relate to similar circumstances.

The issues presented above require us to determine if property and monies are considered a gift or income. This determination is crucial because gifts are generally not taxable, while income is. The definition of income under I.R.C § 102(a) is: “Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.” Since this code section does not define a gift we have to rely on other sources, such as court decisions. Under current income tax law something is only considered a gift if it is given out of “detached and disinterested generosity…out of affection, respect, admiration, charity or like impulses.” In Robert W. Rhodes, TC Memo 1977-33; Commissioner v. Duberstein, supra; Lillian Pascarelli, 55 T.C. 1082, 1090 (1971), the court determined that the most important aspect in determining if a transfer is a gift deals with the intent of the transferor. I will first apply these standards to the property and monies received from Mr. Hissinger prior to his divorce.

In looking at Mr. Hissinger’s intent we may rely upon Greta Starks v. Commissioner, T.C. Memo 1966-134. Starks v. Commissioner involves an...