>>>Seriously, is there any limiting principle?
>>
>>Yes, the money is taxed each time it changes hands.
>
>Oh, so my daughter owes taxes for the allowance I give her?
>How about if I sent her to a very expensive private school, does she owe tax on that value?

As I said much earlier in this thread, in fact, there is a gift tax. However, the threshold is high enough that most people never encounter. So, no, your daughter doesn't pay tax on the couple of bucks of week you give her. But if you gave her, say, $1000 a week, yep, tax would be due on some of it.

As for the school tuition, no, your daughter doesn't owe tax on that. But if the school isn't registered as a charitable organization that's tax-exempt, they pay tax on it. And when they use that money to buy supplies or pay teachers, the supplier or the teacher pays tax on it. That's how the system works.

Tamar