That can't be right. That leaves too much room for fraud. People paying money owed via GoFundMe so as to avoid income tax.
It is correct according to the IRS.
It really doesn’t change the game for tax fraud at all. You have always been able to pay someone for services and treat it as a gift if you wanted to do so. But there are reasons it doesn’t make sense to do that.
If I have a business and hit a contractor to do a job for $10k it is in my best interest to report that as payment for services because it will reduce my business’ taxable income by $10k. Either I am paying the taxes or the contractor is paying the taxes. You could try to create a longer chain - someone gifted it to my business, my business gifted it to the contractor, etc. But getting that many entities to agree to it would be difficult to impossible. And once anyone doesn’t play along, it is in their best interest to report it as an expense on their taxes.
That relies on the fact that business don’t pay taxes on revenue, they pay taxes on profit.
With individuals, it is different. If I as an individual hire someone to paint my house for $10k, I don’t get to deduct that $10k from my income for tax purposes. So if I give them the money (via cash, check, GoFundMe, whatever) and say it is a gift, then the contractor can choose to not report it as revenue and not pay taxes on it.