Payments Received Both From Charities and Individuals by Victims of Orlando Shootings Are Nontaxable Gifts to the Recipient
In a letter to Representative Patrick Murphy dated September 23, 2016 the IRS Commissioner stated to payments made to victims of the Orlando mass shootings at the Pulse nightclub in June by charities do not represent taxable income to those victims.
Rather, the Commissioner states:
In general, individuals must pay federal tax on all income from whatever source derived. However, property received by gift is not taxable. A gift is generally defined as a transfer made out of detached and disinterested generosity.
Payments that individuals receive from a charitable organization as a result of a disaster or emergency hardship are considered to be gifts and are excluded from the gross income of the recipients. Individuals may also help victims of disaster or hardship by making gifts directly to them. These gifts would also be nontaxable.
While payments made directly to victims of this tragedy would not be taxable to the recipient, the Commissioner did not note that those making such payments would not receive a charitable contribution and, if the amount was more than $14,000 to an individual, would result in a reportable gift for the donor.
The treatment described would apply to payments made to provide relief to victims of various tragedies so long as the “detached and disinterested generosity” standard is met.