I don’t know how many times I have been asked if this charitable strategy will work. Give money to a charitable organization and then have them give a scholarship to a related party. Someone apparently tried this and the IRS weighed in.
In a recent case, the IRS ruled that making a donation for one person’s benefit kills the tax deduction. In this situation, a donor who contributed to her church’s scholarship fund wanted the church to use the money she gave for the college tuition costs of the minister’s daughter. The contribution is recast as a gift from the donor to the minister’s daughter, and no deduction is permitted.
