Do I have to pay taxes?
I am trying to start a business so my grandmother has paid every expense of mine for over a year- about 17,000.00 She also gave me a gift of 10,000.00. I do work and make about 35,000.00 a year. Since my grandmother is directly paying my bills do I have to report any of this on my taxes. My sister says i am taking advantage of my grandmother and is threatening to report me to the IRS.
1 Answer from Attorneys
Re: Do I have to pay taxes?
You state the funds were in addition to a gift. Did you render any services to her? Did she get any benefits from the funds she advanced? If so, this could be considered compensation to you. On the other hand, your grandmother may consider these funds an additional gift, reportable as such since she exceeded the $10,000 amount, although for 2004 the annual gift amount is $11,000. The excess could still be co0nsidered a gift, but would require that she file a gift tax return for all amounts, utilizing $11,000 as her annual gift exclusion, and applying the balance against her lifetime exemption. In part, the answer will be determined by your grandmother's intent when she paid the bills.
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