Title

Is it a Tip or a Gift? Investigating Duberstein in the Modern Gratuity Era

Abstract

In the modern era of social media, users frequently promote their acts of generosity. Included in these acts of generosity are tips to restaurant servers that exceed customary amounts. Due to the extraordinary amounts of the transfers, the proper tax treatment as a “gift” or a “tip” is called into question. In Commissioner v. Duberstein, the Supreme Court addressed gifts versus taxable transfers, but did not provide a clear test for taxpayers. In the 60 years since Duberstein, Congress has yet to address the call of Duberstein to create an appropriate test for gift treatment. In this paper, we analyze prior law on gifts and tips. Next, we apply the law to scenarios based on current events. Finally, we recommend that Congress address transfers where the appropriate treatment as a “gift” or a “tip” is in question.

Department(s)

School of Accountancy

Document Type

Article

DOI

https://doi.org/10.2308/JLTR-2020-009

Keywords

Duberstein, gratuities, tax avoidance, tips

Publication Date

1-1-2021

Journal Title

ATA Journal of Legal Tax Research

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