BY LUISA YANEZ

 As much as $110,000 in leftover money from the Elián González legal defense fund has been in limbo for nearly a year, tied up in a dispute with the Internal Revenue
 Service about whether it's a gift or taxable income.

 The cash is part of the total $223,000 donated by the public in March 2000 to finance an anticipated heated custody battle by the boy's Miami relatives. But the legal maneuvering for the 6-year-old suddenly ended when federal agents reunited Elián with his father a month later.

 Left with the cash, the fund's trustees announced in November that most of the leftover cash would be donated to La Liga Contra el Cáncer, the League Against Cancer, a Miami charity that defrays the medical expenses of people who have cancer and have no medical insurance. The nonprofit organization relies on donations to stay afloat.

 But today, the promised money is still unused and being ping-ponged between the IRS and Stanton Levin, the attorney for the Elián Legal Defense Trust Fund.

 The reason for the delay is a tax quandary rooted in how to identify the donations, along with the ``true intent'' of those who gave from $1 to $10,000. Levin said the
 donations were gifts, thus nontaxable. He wants a written legal decision from the IRS agreeing with his interpretation.

 ``We just want the matter settled with the IRS before handing the cash over to the charity,'' Levin said. ``I don't want the IRS coming back two years from now saying they made a mistake and the money is taxable. At that point, if La Liga can't pay the tax, the fund's trustees would be liable.''

 Executive Vice President Brenda Moreira said last week that La Liga still hopes to get the hefty cash donation.

 Moreira said the $110,000 would be welcomed.

 ``We are flattered they thought to donate the money to us, and we don't want to sound ungrateful, but we don't want the community to think we received this money,'' Moreira said. ``We have not seen a penny.''

 Moreira said she had not been notified about the cause for the delay.

 $86,000 IN EXPENSES

 The charity is to receive the amount left after $86,000 went to pay the legal expenses, not fees, incurred by attorneys who worked pro bono for seven months on the case. The boy was returned to Cuba in June 2000. Another portion will go toward expenses for maintaining the fund or will be donated.

 Levin said attempts to settle the matter with the IRS began in February. In anticipation of tax day, Levin sent a check for $92,000 to the IRS along with full disclosure on how it was collected.

 By making a legal deposit of a large portion of the donated money, Levin said the trust fund would avoid interest and penalties, which could be charged. But about two weeks ago, the IRS returned the money, plus interest, Levin said.

 ``The fact that they included the interest payment suggests that the IRS has made a mistake,'' Levin said. ``If the matter is resolved and the government accepts the
 position that all the money is a gift and is nontaxable, as stated in our letter, then they should only return the $92,000, without interest.''

 Levin said he is waiting for an explanation from the IRS. Meanwhile, the money sits.

 An IRS spokesperson said last week the agency could not comment on the matter due to federal privacy laws.

 TYING UP THE MONEY

 ``I will take other steps if no explanation is forthcoming,'' Levin said. Among them: appealing to the IRS' contract resolution division, likely further tying up the money. He might have to send the $92,000 to the government again.

 Levin said identifying such donations for tax purposes is uncharted terrain. He could find no precedent, he said.

 ``The closest factual situation I can compare it to is the Clinton Legal Defense Fund,'' he said.

 In that case, the Clintons may have to pay taxes on the $11 million collected on their behalf to pay for their legal fees during the Paula Jones sexual harassment suit, the impeachment attempt, the investigation of their Whitewater real estate dealings in Arkansas and other legal matters.

 Despite calls by Republicans that Clinton be audited over the legal defense money, the IRS has not taken action.

                                    © 2001