Sunday, June 24, 2012

Karen Klein, the 68-year-old bus monitor who was verbally abused by a group of 12-to-15-year-old students, has received more than $600,000 for a well-earned vacation from Internet users as of Saturday afternoon.

But will she or her nearly 30,000 funders on IndieGoGo be held liable for any taxes on that windfall of online love? Thankfully for both parties, not at all.

Some Our readers (and writers) have been debating whether or not that money would be classified as income, and therefore taxable. We turned to tax lawyer Joanne Clark, Esq., for an expert’s analysis.

“As a general rule, there are no income tax implications to the recipient/donee of a cash gift,” wrote Clark in an e-mail. “If she invests that cash, she would be responsible for income taxes on any income derived from it.”


That makes sense if Klein invested the funds and made a profit, she’d be taxed for her capital gains.
But what about the donors? They’re off the hook as well, as long as no individual donor gave Klein more than $13,000. They can’t, however, claim their donation as a tax write-off.

“The gift tax implications are more relevant on the donor side,” said Clark. “If individual donations don’t exceed $13,000, there are no issues for the donors. If a single donation exceeds $13,000, the donor is supposed to file a gift tax return. I am guessing that most donations are on the small side. And it isn’t clear, but I assume that there is no ‘charitable purpose’ behind these donations for IRS purposes, so there’s no tax deductions for donors.”