The Taxation of Gratuitous Services Gone Out of 'Control'

33 Pages Posted: 25 Nov 2014

See all articles by Allen Madison

Allen Madison

University of South Dakota Law School

Date Written: November 23, 2014


How does the IRS’s ruling that both parties to an exchange of services are subject to income tax apply in the dating context? When meeting, dating, living together, or potentially raising a child together, single people provide services for each other. Most are unaware that potential tax liability lurks behind their performance and receipt of services. This article proposes a framework for determining when a service is gratuitous and thus subject to income tax and then applies that framework to the four potential phases of singlehood. When a service received by an individual has value and occurs subject to the recipient’s control, it is taxable. On the other hand, if either value or control is absent, like when a single-member audience hears a spontaneous serenade by a suitor with an average voice, the recipient is not subject to tax. The serenade had no objective value, and the audience had no opportunity to control the timing or method of the performance. The lack of value for the love interest or control by the love interest makes the receipt of the service gratuitous and, therefore, not subject to tax. In the context of the four phases of singlehood, most services performed, like a serenade, lack one of these two elements.

Keywords: tax, taxation, services, gratuitous, imputed income, gross income, dating, barter exchange, exchange, definition of income

JEL Classification: A19, A2, B1, B15, B20, B29, B3, B4, E21, H20, H24, H30, H31, K34

Suggested Citation

Madison, Allen, The Taxation of Gratuitous Services Gone Out of 'Control' (November 23, 2014). University of Memphis Law Review, Vol. 45, No. 115, 2014, Available at SSRN:

Allen Madison (Contact Author)

University of South Dakota Law School ( email )

414 E. Clark Street
Vermillion, SD 57069
United States


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