Discussion:Live in Girlfriend

-Chad Beckley

Support for a dependant is not usually subject to gift taxation.

If he supports her, and co-habitation is not illegal in the state they live in, she's under the gross income limitation, AND they were together the entire year, then he can claim her as a dependant.

However, "support" is a rather loose phrase; as you say it encompasses use of the auto, clothing, and so forth. Is this a cheap flat, Ford Ka, & Walmart? Or a Park Ave address, Farrari, & fur coats? If it's basic support, it's not generally considered a gift in part because it's usually under the limit for the current year.

This is because there can be some discount to the valuation for it not being "hers". For example, you can easily argue that the value of the housing isn't an even 50/50 split. Assuming it's a one bedroom, there ain't nobody else he's gonna get to split it 50/50 except a bed buddy. Heck, he can't get his current bed buddy to split it 50/50. So her share is clearly not worth 50% of the cost of housing.

However, I haven't read up on when support greatly exceeds the annual gift value (due to a Park Av lifestyle) for someone who isn't a dependant (what if she moved in mid-year?) or for a non-child relative. Where along the spectrum does one draw the line between the simple provision of access to an automobile and an outright gift of $100,000 Ferrari? Has anyone got some facts or court cases on this?

No matter how high the gift value, Miss Livin-It-Large owes no tax or files any return; it's Sugardaddy's responsibility, not hers. However, you say "a few on the side with gifts from some people". If she's got multiple gentlemen friends she's keeping happy, then it could be she's engaged in a trade or business (not the kind one mentions in polite society). If that's the case, she may owe income tax and self-employment tax on her supposed "gifts".

For anyone who cares, I had a further thought about how to phrase the issue of the valuation since I posted this morning. The cost of the support (in particular, the housing) is one figure (could be considered 50/50 in many cases), but the value of the housing is whatever somebody might reasonably pay to shack up with Sugardaddy. Thus, on a gift tax return, you report the Basis (cost of the item) and the Fair Market Value on the date of the gift (what someone might reasonably pay for the item). As the FMV for the privilege of shacking up will inevitably be less than the cost to the gentleman, the housing for a Walmart lifestyle can easily stay under the $11,000 limit.

Riley2, I seem to recall somewhere that paying university costs for a child over 18 (if the payments are made directly to the university, even if the child isn't your dependant) was specifically not considered a gift; but this is over 8 years ago. Any ideas on that? It was so long ago I haven't the faintest idea where to look that up.

This is an interesting question that I've never thought about before. But I think you're right Lizzit, if the Sugardaddy is transferring the fur coats, etc., and it exceeds the annual exclusion, he should be filing a gift tax return.