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Financial Planning / Tax Strategies
|Subject: Re: Oprah and tax trouble?||Date: 4/24/2005 3:06 PM|
|Author: irasmilo||Number: 78934 of 121802|
Re: Oprah's $5K gifts to 100 employees.
I think she's got it all wrong. In a discussion of a similar case (corporation president wanted to gift $10K to each of 10 executives from personal funds) on misc.taxes.moderated last November, Brian Bivona, CPA posted the following:
"I suppose that you did not read my response that was posted
shortly after your original post. Your friend and his
employer both have a problem!"
"Section 102 generally excludes gifts from income. On the
other hand, section 102(c)(1) provides that the exclusion
from income for gifts does NOT include amounts that are
transferred by or *for* an employer to or *for the benefit
of* an employee."
"Thus is doesn't have to be a transfer directly from an
employer to the employee to fall outside the general
exclusion. A transfer by the president to the 10 other
employees as a gift would probably be treated as paid "for"
an employer, even though it was not transferred "by" the
employer. Thus, the scheme WOULD NOT WORK."
"Further, if this were unwound on audit, the profit-sharing
plan would probably have an excess contribution for the
president and would have underfunded the other 10. It could
result in excise taxes or possible disqualification of the
plan. The employer will also likely end up with a nasty
penalty dispute over the payroll taxes that were not
You would think that someone with that much money (Oprah), could afford some decent tax advice before she acted foolishly.
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