The above-the-line deduction for tuition and fees for higher education can be claimed by a taxpayer only for him/herself, spouse, or dependent. If your grandchild is your dependent, then you qualify for the deduction. For gift tax purposes, payments of tuition directly to an educational institution are exempt from gift tax, regardless of amount.
Rules limiting loss deductions to cash investments and personal liability notes. An exception for real estate treats certain nonrecourse commercial loans as amounts “at risk.”