Power of Attorney

[Christian]

A son who is serving as his parents power of attorney has taken $15,000 as a fee for his services in 2017. In having his parent's return prepared he advised he would like to know if he can deduct this expense on his parents' return. My opinion is he cannot , however, as a caution I am submitting this forum entry as I cannot find anything which would allow it but someone here possibly can justify his request.

[Pacun]

What services is he providing to the parents?

[Roberts]

Is the son reporting the income on his tax return?

 

I would deem the expense associated with being a Power of Attorney to be comparable to legal fees which aren't deductible.

[Christian]

He basically pays all bills and oversees his parent's properties as well as having the power to sell assets. I doubt he is reporting any of it as he is unemployed. It could be looked on as a parental gift and like Roberts I see it as nondeductible legal fees.

[grandmabee]

If  he wants to deduct it you should tell him he has to claim as self employed income on his return.  SE tax.

he will change his mind.

But I agree it is not deductible to his parents and I think it taxable to him.  he is providing a service.

[Max W]

On 9/7/2018 at 7:33 AM, Roberts said:

Is the son reporting the income on his tax return?

 

I would deem the expense associated with being a Power of Attorney to be comparable to legal fees which aren't deductible.

They can not be legal fees. because he is not an attorney-at-law.  A POA makes someone an Attorney-in-Fact.  The payments can be for management fees, consulting fees and fees for other services performed.  One possible way to avoid the SE tax would be for the parents set up some sort of trust with the son as trustee.  Since he is not a professional trustee, the payments to the son would would be ordinary income, Line 21.  

[Catherine]

I'd call it a gift from the parents.  "Here, son, we're taking a lot of your time and want to thank you."

[Abby Normal]

The IRS will say that this is compensation and needs to be reported, even if you try to call it a gift.

[Jack from Ohio]

1 hour ago, Abby Normal said:

The IRS will say that this is compensation and needs to be reported, even if you try to call it a gift.

Agree!!!

[Catherine]

Good.  Then my comment served its purpose, to draw people back to this being taxable income.  Line 21; the guy's not in the business of doing this for profit.

[Roberts]

How long can the unemployed son charge his parents to do work before it becomes his job?

How would the IRS determine it is payment for work instead of a gift? If my parents give me $1,000 at Xmas and I mow their yard all year - should I be reporting it as my bonus?

[Lee B]

The question is can a son with his parents POA give himself a nontaxable gift ?

[Catherine]

1 hour ago, Roberts said:

the unemployed son charge his parents 

It changes when he hires himself out to non-related parties to do the same work. 

A friend, many years ago, spent several years unemployed while living with and caring for his grandparents (keeping a promise he'd made as a teen).  Once both were gone, he discovered a new profession:  elder care advocate and consultant.  But he wasn't taking care of his grandparents for profit as a job.

[Christian]

I thank all of you who responded. I determined not to deduct the $15,000 agreeing with most of what was said. I am certain he is not reporting it and of course no 1099-Misc will ever see the light of day. As it turned out the parent's huge deductible medical expenses eliminated any tax due and they are being refunded all taxes withheld.