Money was to go to cancer league

 BY LUISA YANEZ

 The Elián González Legal Defense Trust Fund, formed to help a Miami family's
 attorneys battle the federal government, may make its single biggest payment to
 Uncle Sam.

 After more than a month of wrangling, the trustees decided last week that they
 could not donate as much as $140,000 left over from the fund to the nonprofit La
 Liga Contra el Cancer (the League Against Cancer).

 The trust fund could owe as much as $92,000 in income tax, its legal advisor,
 Stanton Levin, confirmed Tuesday.

 The tax predicament surprised the three trustees, who have held several meetings
 in the last weeks trying to come up with a solution. They hope to persuade the
 Internal Revenue Service not to tax the trust.

 ``Can you imagine if after all this, the U.S. government is the one that gets to
 keep this money?'' asked lead trustee Eloy Gonzalez.

 The fund was created in March at Ocean Bank to help pay the expenses of the
 team of attorneys involved in the custody battle over the 6-year-old boy.

 The last-minute tax quandary stems from the interpretation of the ``true intent'' of
 those who made the donations, ranging from $1 to $10,000.

 Among the donors were Florida sugar magnates Alfy and Pepe Fanjul, who
 chipped in $10,000, and Miami-Dade Mayor Alex Penelas, who gave $1,000 from
 his campaign coffers.

 ``It's an unusual situation,'' said Levin, a Coral Gables tax attorney who oversees
 the trust.

 ``The issue is whether or not the money donated by people should be viewed as a
 gift or income for a cause they could get something in return for. There is no
 precedent on this. The closest factual situation we can compare it to is the
 Clinton Legal Defense Fund.''

 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, impeachment, the investigation of the Clintons' Whitewater real estate
 dealings in Arkansas and other matters.

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

 Levin said he hopes to convince the government that the money to the Elián
 Defense Trust Fund was a gift and nontaxable.

 ``There is no way we can look at a donor's heart,'' Levin said. ``We think there is a
 better than 50-50 chance that the IRS will decide the donations are gifts.''

 For now, the trustees plan to deposit $92,000, along with the tax return, with the
 IRS by late January.

 They also plan to include an explanation of the facts and to ask the IRS to review
 the tax return as quickly as possible.

 By volunteering the money, Levin said the trust fund would avoid interest and
 penalties, which would otherwise be charged, he said.

 Levin said the trust fund's tax return is not due until April 15, but in anticipation of
 the tax bill, he said the fund will send the form three months early.

 ``We haven't had any contact with the IRS, but this falls under the tax rules of any
 other trust fund. It all depends on how they interpret it,'' Levin said.

 A spokesman for the IRS's taxpayers' advocates office in Fort Lauderdale could
 not be reached Tuesday night. Neither could a Florida region spokesman.

 Already, $70,000 has been paid for the legal expenses of the attorneys who
 worked pro bono on the case.

 The league, which helps pay for the medical expenses of many without insurance,
 was to have received its first installment -- $100,000 -- last month during a
 ceremony honoring the attorneys.

 The event at the Dade County Auditorium was canceled at the last minute when
 lead attorney Kendall Coffey began working for Al Gore's campaign in the
 post-election recount fight.

 Coffey's move angered supporters of Elián's Miami relatives, who felt betrayed by
 the Clinton administration and campaigned against Gore.

 For its part, the League Against Cancer has refused to take the money and deal
 with the tax problem.