If the glitz and glamor of a romantic dinner or jewelry can’t express your feelings, filling out this form probably won’t do it, either.
In the latest Tax Court decision, it was found that money given to a live-in girlfriend “for cooking and cleaning services” was actually a tax-free gift. Howard Shih, an artist and calligrapher, paid $10,500 over the course of a year to his significant other.
While Ms. Yang performed occasional cooking and cleaning services in Shih’s apartment, she didn’t work under a written or oral contract. She claimed the money was given to her out of affection, and used it to help plan the couple’s wedding.
Shih, on the other hand, claimed the couple’s relationship wasn’t serious, and that they’d never been intimate, let alone engaged. Because some of the checks he’d written to Ms. Yang had “wages” or “salary” on their notation lines, Shih claimed their relationship was entirely business-related. He reported her payments on a 1099-MISC and deducted those payments for computing his own income.
Eventually, the Tax Court relied on Ms. Yang’s detailed testimony of countless dates and intimate events to prove the two were involved in a relationship.
Cite: Yang v. Commissioner, T.C. Summ. Opp. 2008-156.