[ken5050]

Many thanks..FR is indeed an amazing place....15 minutes after I post a question..asking for a CPAS's opinion..here you are!!! RE the gift tax issue..gift tax laws only apply from one individual to another, right? If the payment was made from one of his corporattions, and was NOT deducted as a business expense..would it still be income to her? I thought the basic concept was..if one entity deducts it, the other has to report it...like the difference between alimony and child support? IF he indeed pay a gift tax..that about another $5 mill right? As long as I have you..one more questiuon, if I may..when the story first broke, I recall reading something about Tiger's foundation..that it had only donated a very small amount to children despite having raised millions. Aren't charitable entities returns publicly available?

Again, thanks..

[TheCPA]

Expenses of a for-profit corporation are considered to be business expenses. However, that does not mean that all business expenses are deductible.

That all expenses of a corporation are considered business expenses is why Section 212 does not apply to corporations. Section 212 allows individuals (and also estates and trusts because they are taxed like individuals with certain exceptions) to deduct expenses for the production of income for activities that do not rise to the level of a trade or business.

Corporations may make gifts to charity for which they may claim a deduction up to about 10 percent of their income (Section 170). However, you are correct—corporations are not subject to gift tax.

Whether a business receives a deduction for an expense does not determine whether the income is taxed to the individual. Gross income includes all income unless it is specifically excluded (Section 61(a)).

Yes, in some cases, there is a matching of deductibility and taxability such as alimony is taxable to the recipient and deductible by the payor and child support is excluded from gross income and not deductible by the payor.

However, that is not always the case. Assume a business paid someone to kill a rival. The payment for the killing would not be deductible because murder is against public policy. However, the payment would be included in the hitman’s gross income.

The income tax return of a not-for-profit organization is Form 990. I am not sure if there is a special version of it for a foundation. I am not sure about the public availability of such forms, but I think they are supposed to be available to the public.