I am looking to make a career change from a software engineer to become a commercial pilot. Becoming a pilot requires a lot of specialized training and therefore is very expensive.
A few years ago my mother died very suddenly and, to cut a long story short, my father has some money in savings from her life insurance plan. He would like to use some of this money to pay for the majority of my flight training.
To complicate it one step further, I now live in the United Kingdom and he lives where I am from in the United States.
I am aware there is a gift tax in the United States. I see there are some exemptions to this rule, notably the payment of tuition. Here is where I would like to receive some clarity.
- What is the definition of tuition in the eyes of the Internal Revenue Service?
- Are flight schools considered an educational organization?
- Is there any restriction on the payment of tuition to an education organization in a foreign country?
I have had a read through Section 2503 of the US Tax Code and it seems very generic. It states there is an
Exclusion for certain transfers for educational expenses ... as tuition to an educational organization described in section 170(b)(1)(A)(ii) for the education or training of such individual".
The referenced section goes on to define an educational organization as
an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on
To which I believe an argument could be made that a flight school meets that definition.
There is no mention in the tax code about foreign organizations so I would take that to mean there is no exclusion.
I would love to know the particulars for the points above if anyone has any specific knowledge.