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Better yet, if your wife's mother or grandmother were to pay your wife's tuition directly to her school, there is no limit on the amount that can be given. For example, your mother-in-law can make a check out to Fool University in the amount of $30,000 to pay for your wife's tuition. That $30,000 is made as a gift for tuition expenses, so none of it is subject to gift taxes.

That's what we already did, but we somehow got the impression that doing so benefitted no one. We originally thought her grandmother could count it off, but someone told us she couldn't. So she was paying for my wife's tuition, but no one got any tax break from it. So we figured if she gave it to us first, then maybe we could apply toward out Lifetime Learning Credit.

What, if any, tax break could my grandmother receive from giving the gift? Does it make any difference to her whether she gives it to us or directly to the school?

(it is much less than 10K, so that limit isn't an issue)

Thanks for your help.
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