Must my "X Laws" claim the cash I pay them monthly to pick up kids from school?
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All receipts (without debt) are income unless there is an exception in the tax code. Section 102(a) provides an exception for a "gift." So gifts are not taxable income to the receiptient. But receipt of payment for performing services is taxable.
Here is some language interpreting what a gift is:
https://en.wikipedia.org/wiki/Bogardus_v._Commissioner
The term "gift" in §102(a) is largely to be defined by reference to the motives of the payor. If the payment, though voluntary, is "in return for services rendered," or proceeds from "the constraining force of any moral or legal duty," or anticipates a "benefit" to the payor, then it is taxable to the payee even if characterized as a "gift" by the payor.
On the other hand, if the payment proceeds from a "detached and disinterested generosity," if it is made "out of affection, respect ... or like impulses," then it is an excludable gift even though the relationship between payor and payee has previously been in a business context.
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