Business owner "Kate Doe" regularly gives monetary and non monetary support to daughter, "Jane Doe". Jane is an adult (age 48) and has received support from Kate for a dozen or more years.

Kate pays Jane's rent, phone, car insurance, etc and tuition at a private school for Jane's minor child. Kate's business derives it's income via referrals from Social Services. Kate is reimbursed for services (tutoring at-risk children of low income families) by the state.

Kate does not report or pay taxes on monies or expenses given to Jane. All transfer of money is on a personal basis and no records exist. Jane does not appear on any employee list. After discovery of monies provided, Jane disclosed income to the family court, reporting it as "income" received for "work" performed for Kate.

Is this considered taxable income or a gift? Is there an upper limit to this kind of regular gift?"

Putting it in perspective, Jane reports no income and qualifies for public assistance, food stamps, housing subsidy, Medicaid, etc. Additionally, Jane has regularly over the last 3-4 yrs qualified and received low income federal college grants and loans. This despite Jane's minor child attends private school, paid for by Kate. Jane's child also receives subsidized tuition through the school and benefits via a state, low income lunch program.

Jane's SS income report shows zero wages for the past 5 yrs. (This from some who has seen the actual SS report)

Is there any fraud (tax evasion on part of Karen) going on or is it just family helping family?