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Topic Income from relative
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By newuser
On 04/18/05
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I just received a $10,000 check from my brother to help with my recent medical bills. What's the best way to handle this money so as I won't have to report & pay taxes on it?
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By gramps
On 04/19/05
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I would just assume that everything going from a US bank account to a US bank account is known to the IRS.
With that said, there may be some very good deductions if you actually spent (/are going to spend) this money on medical bills. Have you analyzed your options in legally deducting the cost of medical bills?
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By newuser
On 04/19/05
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My medical bills will certainly exceed the amount received.
So as I understand, it's best to simply deposit the check and be sure to deduct all paid medical bills on my 2005 return.
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By gramps
On 04/20/05
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Well, I am not a tax expert, so I can't tell you what's best, but there is a medical deduction and it seems that in your case it will be allowed (there's a small income-% threshold, but it's fairly easy to pass with over $10,000 in fees). If you don't think you can afford the services of a tax adviser, I would even look into a piece of software that has a good deductions calculator. You can buy it next year or right now to put the numbers in and make a decision.
The second option would be (and this is where I'm completely not sure, so you really need to find somebody more knowledgable) to try to present it as a loan from the relative rather than a gift because I do not think you'll be required to consider the loaned amount your "income". Again, an expert's opinion is needed here.
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By gromco
On 04/20/05
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You can also consult the IRS publication 502:
>http://www.irs.gov/publications/p502/ar02.html
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By gramps
On 04/20/05
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I had one more thing to add: the threshold (for total medical expenses for you to be able to deduct them) is 7.5% of your income, but a lot of things are allowed, such as transportation costs, etc.
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