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4. This year Gerry’s friend, Dewey, was disabled. Gerry paid $17,850 to Dewey’s doctor for medical expenses and paid $13,450 to State University for college tuition for Dewey’s son. Required: a-1. Ha...

4. This year Gerry’s friend, Dewey, was disabled. Gerry paid $17,850 to Dewey’s doctor for medical expenses and paid $13,450 to State University for college tuition for Dewey’s son.

Required:

a-1. Has Gerry made taxable gifts?
a-2. What is the amount of the taxable gift?

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Answer #1

As per the provisions of IRS, any amount paid to another person > $15000 is a taxable gift however there are 2 exclusions to this rule- Medical and Educational gift
If any amount is paid towards Medical care or Educational tuition payment towards another person irrespective of the fact whether that person is a relative or not than the whole amount will be exempt from taxation. However there are some conditions that must be fulfilled
1- Payment must be made directly to institution providing the Medical (In this case doctor) and Educational (in this case State University)
2- Payment must not be made to the person on whose behalf Educational and Medical expense are paid

Since in the given case Gerry is paying for his friend Dewey's medical expenses ($17850) to his doctor and for Dewey's son's college tuition ($13450) to State University and not in the hands of Dewey or his son, therefore

a-1 = No, Gerry has not made taxable Gifts
a-2 = The amount of taxable gift is $0

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4. This year Gerry’s friend, Dewey, was disabled. Gerry paid $17,850 to Dewey’s doctor for medical expenses and paid $13,450 to State University for college tuition for Dewey’s son. Required: a-1. Ha...
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