1. Are grants individuals receive under a state’s program to pay or reimburse ce

Question

1. Are grants individuals receive under a state’s program to pay or reimburse certain reasonable and necessary medical, temporary housing, or transportation expenses they incur as a result of a flood includible in gross income?

2. Are grants individuals receive under a charitable organization’s program to pay or reimburse certain medical, temporary housing, or transportation expenses they incur as a result of a flood includible in gross income?

3. Are grants employees receive under an employer’s program to pay or reimburse certain reasonable and necessary medical, temporary housing, or transportation expenses they incur as a result of a flood includible in gross income?

Make sure to give the complete and appropriate citation.

Explanation / Answer

To know that the grants received is included in gross income or not we need to understand sec 139 and sec 102:

Section 139(a) provides that gross income does not include any amount received by an individual as a qualified disaster relief payment. The term qualified disaster relief payment” means any amount paid to or for the benefit of an individual: (1) to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster to reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement, is attributable to a qualified disaster or by State, or local government in connection with a qualified disaster in order to promote the general welfare. Thus the administrative general welfare exclusion with respect to certain disaster relief payments to individuals. Section 139(b) also provides that the exclusion from income applies only to the extent any expense compensated by such payment is not otherwise compensated for by insurance or otherwise.Flood is included in the definition of qualified disaster so it is anticipated that individuals will not be required to account for actual expenses in order to qualify for the sec 139 exclusion, provided that the amount of the payments can be reasonably expected to be commensurate with the expenses incurred.”

Section 102 provides that the value of property acquired by gift is excluded from gross income. gift must proceed from a detached and disinterested generosity, out of affection, respect, admiration, charity . Apayment made by a charity to an individual that responds to the individual’s needs, and does not proceed from any moral or legal duty, is motivated by detached and disinterested generosity. Section 102(c) provides that section 102(a) shall not exclude from gross income any amount transferred by or for an employer to, or for the benefit of, an employee. Governmental grants in response to a disaster generally do not qualify as gifts because the government’s intent in making the payments proceeds from its duty to relieve the hardship caused by disaster

(1) Payments individuals receive under a state’s program to pay or reimburse unreimbursed reasonable and necessary medical, temporary housing, or transportation expenses they incur as a result of a flood are excluded from gross income under the general welfare exclusion. Such payments also qualify for exclusion under section 139-they are paid to compensate individuals for expenses that are not compensated for by insurance or otherwise. Thus, the grants are in the nature of general welfare and excluded from the recipients gross income under the general welfare exclusion.

(2) Payments that individuals receive under a charitable organization’s program to pay or reimburse unreimbursed medical, temporary housing, or transportation expenses they incur as a result of a flood are excluded from gross income under section 102-grants are made out of detached and disinterested generosity rather than to fulfill any moral or legal duty. Thus, the grants are excluded from the gross income of the recipients as gifts under section 102

(3) Payments that employees receive under an employer’s program to pay or reimburse unreimbursed reasonable and necessary medical, temporary housing, or transportation expenses they incur as a result of a flood are excluded from gross income under section 139-The grants are reasonably expected to be commensurate with the unreimbursed reasonable and necessary personal, living, or family expenses that employees incur as a result of a flood that is a qualified disaster as defined in under 139(c). Moreover, they are paid to compensate individuals for expenses that are not compensated for by insurance or otherwise

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