Quote Originally Posted by Gato78 View Post
His wife learned of the affair when the real estate tax bill for his mistresses' house came to Pearl's house.
Hmmm. OK, so the tax payment is a gift, which has to be combined with other gifts to the mistress, has to be below the annual exclusion to avoid any gift tax issues. Alternatively, it's compensation for services rendered (heh). If so, I presume she's subject to self-employment tax.


Either way, it's a curious case study on the tax consequences of the situation.