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Is there any law that would block a non-profit from giving a gift card to someone in need, say, a $100 food store gift card?

If a non-profit is allowed to give the gift card to someone in need, is the receiver of the gift card liable for paying taxes on that gift card?

  • OP's other question was re 401(k), so I'm assuming US. – JoeTaxpayer Apr 10 '18 at 10:45
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    Are you the non-profit, a donor, or a recipient? – mhoran_psprep Apr 10 '18 at 10:51
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Recipients of money/gift cards are not liable for taxes as it is considered a gift. The non-profit handles the tax liabilities of income vs disbursement on their end. This is assuming the recipient is a beneficiary of the non-profit, not a volunteer or employee of the non-profit. If they are a volunteer or employee, it can cross into the grey territory of being considered compensation or a bonus.

There is no reason, that I'm aware of, that a non-profit would be prohibited from distributing funds on gift cards. Non-profits in the US provide both financial and physical assets to beneficiaries. Physical assets can include cars, clothes, toiletries, food, etc. Providing gift cards allows the non-profit to restrict the use of the funds provided to the beneficiary to the purchase of eligible products rather than just handing over cash that might be used for items not covered under the non-profit's mission statement.

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BobbyScon's answer is absolutely correct. However there is another aspect to consider which is the purpose of the non-profit. Many non-profits are aimed at relieving poverty or helping poor people. However some have other focusses, such as addressing environmental concerns, or providing expensive education to rich people. If a non-profit gave out gift cards for a purpose that wasn't part of their mandate they could fall foul of the laws regulating non-profits, especially if it was a charity that had solicited funds for specific reasons that the gift card did not fulfil.

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