If a taxpayer makes large gifts above certain amounts, the donor must generally pay gift tax. In one case, an estate argued that sizable payments made by the deceased to various people weren’t taxable gifts but were “payments for care and companionship services.” In the last years of his life, he gave money to his daughter, stepchildren and others with whom he had social or romantic relationships. The U.S. Tax Court ruled these were taxable gifts. The payments were made by checks, which contained no indication they were meant as compensation. Plus, there were no Forms W-2 or 1099 issued for the payments and the taxpayer didn’t report them as expenses on his returns. (TC Memo 2023-25)
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