Bullied grandma's $630,000 windfall tax-free

ALEX FITZPATRICK
Last updated 12:54 25/06/2012
Karen Klein
WINDFALL: Fundraising website indiegogo.com started accepting donations, aiming to raise $5000 to send bus monitor Karen Klein on a vacation. It has now raised over $630,000.

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This post was originally published on Mashable.

Karen Klein, the 68-year-old bus monitor who was verbally abused by a group of 12-to-15-year-old students, has received more than US$630,000 (NZ$800,000) for a well-earned vacation from internet users.

But will she - or her nearly 30,000 funders on IndieGoGo - be held liable for any taxes on that windfall of online love? Thankfully for both parties, not at all.

Some have been debating whether or not that money would be classified as income, and therefore taxable. We turned to tax lawyer Joanne Clark, Esq., for an expert's analysis.

"As a general rule, there are no income tax implications to the recipient/donee of a cash gift," wrote Clark in an e-mail. "If she invests that cash, she would be responsible for income taxes on any income derived from it."

That makes sense - if Clark invested the funds and made a profit, she'd be taxed for her capital gains.

But what about the donors? They're off the hook as well, as long as no individual donor gave Clark more than US$13,000. They can't, however, claim their donation as a tax write-off.

"The gift tax implications are more relevant on the donor side," said Clark. "If individual donations don't exceed $13,000, there are no issues for the donors. If a single donation exceeds US$13,000, the donor is supposed to file a gift tax return. I am guessing that most donations are on the small side. And it isn't clear, but I assume that there is no 'charitable purpose' behind these donations for IRS purposes, so there's no tax deductions for donors."

For further clarification, Mashable called up Slava Rubin, CEO and founder of IndieGoGo. Slava was careful to say that he couldn't legally give tax advice because he's not a registered accountant. However, he was able to tell us that the Karen Klein campaign "is not an official non-profit," so indeed the donors wouldn't be able to write-off their donation.

Mashable is the largest independent news source covering digital culture, social media and technology.

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