1. A couple things...remember he used the word "grant." If someone pays for tuition directly to an ed institution there are no tax implications for the person paying the tuition or the student. In fact, it doesn't go against the annual IRS gift limit of $15k/$30k per couple.
2. There's no way that Robert Smith would give this gift and have students treat it like compensation..that would go against what he intended. Paying off someone's loan does trigger gift tax and I can promise you Smith has already used up his lifetime limit of $11.4 million
3. An interesting word that he used when announcing the gift was "a grant." He clearly did his homework (not surprised, he's a billionaire!). Foundations paying off student loans is a newer area when it comes to IRS, but as luck would have it there's some recent news in this dept
4. On May 17th, the IRS released a determination letter it sent to an unnamed foundation in Feb. They ruled that the foundation can make grants by paying lenders directly or in rare circumstances making the payment to the student who will send to lender. https://www.irs.gov/pub/irs-wd/201920015.pdf …
5. Of course the IRS notes in the determination letter that grants can't be made to anyone with a conflict of interest, member of the board of directors, managers, and their family members, etc.
6. So bottom line, @4cast4you, as long as it comes from a foundation, this gift will have no tax implications for Smith or the students even though his foundation will be paying lenders directly and not the university itself.
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