Thanks for such a fast response. Quite ironically, your reply may lend far more insight by what it fails to say than all details that are expressed. So, is my perception correct that no specific IRS Reg or US Code section makes explicit reference to voluntary election of gift funds as taxable income?
On retrospect, I guess that's why 'loophole' is an apt description for a scenario like this where no explicit prohibition is fair to take as implied legality of some act.
