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If my wife's mother or grandmother were to give us the money needed for tuition, and then we turned right around and paid that
money to the school, 1) do we have to report the gift as income and 2) can we count that as education expenses applicable toward
the Lifetime Learning Credit?

I've been told that a parent (or grandparent?) can give his child a gift up to $10,000 without it counting as income for the child. Is
that BS? or true?

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.

In your example, the money passes through your hands and then goes to the school, so it is subject to the $10,000 tax-free gift limitation for 2001.,,i1%3D50%26genericId%3D12906,00.html

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