The Unofficial Holiday Guide for the Good Samaritan
As we are now in full throttle of the holiday season, most of us will receive word of an overwhelming need of an individual in our community, and will probably be moved to give. Cash, checks or goods are sent with little or no questions asked. Depending on the circumstances, you may even be moved to start a collection for someone else in need yourself.
Could the giver (a good Samaritan) or the collector (another good Samaritan) have tax consequences as a result of this gift? Some of the answers come from the tax code, which can be confusing. Other answers come from state law.
Unless the collector is an existing charity exempt from Federal income tax under section 501(c)(3) of the tax code and is not obligated to benefit particular individual(s) with the gift, the giver has made a non-charitable gift for which no charitable income tax deduction is allowed. So give, but understand, the gift isn’t a tax deductible charitable contribution.
Sometimes it is not clear who the giver is under the tax code. If a company gives a gift and a charitable deduction is not allowed, the company is not considered the giver. Instead, the owners of the company have made a gift. Be careful to avoid contributions to a collector of non-charitable gifts through a company. You may instead gift your co-owners a tax issue.
Sometimes it is not clear who the donee is under the tax code when there is a collector. A combination of state law and the tax code suggest that the collector may be a trustee of a trust for the ultimate recipient when the collector does not have an absolute right to a non-charitable gift. In such event the law imposes duties and obligations on the collector as trustee. When such a trust exists, what are the terms? An oral trust can exist in certain states, including North Carolina. The terms of a trust may also be evidenced in the collector’s communications soliciting donations or other documents. When the terms of a trust are incomplete, additional terms are provided by law, which may require an avoidable lawsuit. If you act as a collector, clearly communicate your intentions.
Last, the tax code requires a giver to file a gift tax return to report non-charitable gifts during a year, unless all gifts for the year are within the annual exclusion amount for gifts during the year ($14,000 of value for 2014, $15,000 for 2015 and indexed for inflation thereafter) or allowed a charitable tax deduction. In addition to the dollar limitation on gifts covered by the annual exclusion, such gifts must also be of a present interest which may not be the case when a collector exists. If the individual in need does not have an absolute right to the non-charitable gift or is given too much, you may have responsibilities.
We counsel clients to make good Samaritan gifts directly to individuals in need of assistance so long as all gifts to the individual in a year do not exceed the annual exclusion amount. We do realize this can be confusing, please click here for additional information on Richard Kort and contact us if you need legal advice. 828-254-8800