A gratuitous transfer of cash made directly to an individual who uses the entire amount of the cash to pay medical expenses is not subject to a gift tax.

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The transfer of cash, even if used for medical expenses, can be subject to gift tax if it exceeds the annual exclusion limit and is not paid directly to the medical institution. Direct payments for someone's medical expenses are not considered gifts if paid directly to the medical institution, but giving cash to an individual does not qualify for this exception.

A Gratuitous Transfer of Cash Made Directly to an Individual