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11-29-2012, 11:14 PM
Deal Law
S corps suck
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Join Date: Jan 2006
Location: Westford, MA
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Originally Posted by Alycat View Post
Thank you for your informative post

It is possible that he classified the ring as some type of bonus but I think the most likely scenario is that he hit the lifetime max. Either way, the taxing wasn't him "sticking it" to his employees.

Also, don't they have payment plans for those who cant afford the upfront payment?
I have no idea re the payment plans. Gift tax is not actually my thing (corporate tax is), I just happened to be working on a very similar issue today when this story reared its head.

What I failed to realize initially is that gifts made to employees are in fact includible in the employees' gross income for income tax purposes, as an employer is deemed to not give gifts out of "detached and disinterested generosity." So now the whole story makes sense.

Without taking the preceding into account, it wouldn't make sense that employees would have footed any tax bill if the rings were gifted, as it would have fallen on Jacobs to pay the gift tax. However, this clearly falls under the rule above from IRC Section 102(c) and thus the employees do in fact have taxable income equal to the value of the rings.

However, that the employees were forced to foot the tax bill is not a function of Jacobs being a miserable *******, but of U.S. federal tax law. So, in sum, don't jump on Jacobs for this one. Your ire is misplaced.

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