jklcpa Posted August 13, 2007 Report Share Posted August 13, 2007 One of my C corps had a shareholder die during their latest fiscal year. The stock redemption agreement states a fixed payment of $5000 as a death benefit to the widow. This is in addition to the price of the stock redemption. Is this deductible as an ordinary & necessary expense? Is this taxable to widow & is it reported on 1099-MISC as other income, or because it's a death benefit non-taxable? Thanks for any help. I'm definitely not thinking clearly on this one!! Quote Link to comment Share on other sites More sharing options...
OldJack Posted August 13, 2007 Report Share Posted August 13, 2007 This is normally a W2 taxable benefit but it depends upon if the payment is non-taxable as a cafeteria plan, life insurance plan or just an employee benefit. See Publication 15B. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted August 13, 2007 Author Report Share Posted August 13, 2007 Thank you OldJack. The wife is also an employee of this company, got $5000 in cash from the company. No life insurance or cafeteria plan was involved. It was only stated in the buy-sell agreement. I was thinking it should go on 1099-Misc, box 3 as other income, taxable to her. I wasn't thinking about it being a fringe benefit, that's why I didn't consider the W-2 reporting. Quote Link to comment Share on other sites More sharing options...
veritas Posted August 14, 2007 Report Share Posted August 14, 2007 This is normally a W2 taxable benefit but it depends upon if the payment is non-taxable as a cafeteria plan, life insurance plan or just an employee benefit. See Publication 15B. Hey Oldjack, What happened to the $5000 death benefit exclusion? I don't remember anymore. By the way are you looking in on the old board? You namr is still coming up. Quote Link to comment Share on other sites More sharing options...
OldJack Posted August 14, 2007 Report Share Posted August 14, 2007 Hey Oldjack, What happened to the $5000 death benefit exclusion? I don't remember anymore. By the way are you looking in on the old board? You namr is still coming up. Don't know for sure but there are certain exclusions for Public Officers, Victims of terrorism, and Astronauts killed in the line of duty [code §101(i)(1)]. Reg. 1.404(a)-12(b )(2) says that payments to the widow or other beneficiaries of a deceased employee to continue salary for a reasonable period are deductible by the employer to the extent they qualify as a business expense. However, payments as a gift based on the beneficiary's need doesn't qualify as a business expense. Payments under a group life insurance plan are still excludable, otherwise it looks like any payments fall under an employee benefit rule and would be w2 taxable. No I don't look at the other board. However, I just might go look, but I expect whatever they are saying is probably true. LOL Good to see you back on this board Veritas. edit: Well!! I took a look at the other board and it was no real surprise to see that Bees Knees accused me of recently posting a fake post. For the record I have never posted any posts under any name on that board since I was unjustly banned from the forum. I am not registered on that forum under any name and as such I will not post on that forum now or in the future. Such comment by Bees Knees shows the character of the gentleman. Quote Link to comment Share on other sites More sharing options...
veritas Posted August 14, 2007 Report Share Posted August 14, 2007 Oldjack Take a look on the other board at the one called "Our Cpa misled us". It's a good one. Quote Link to comment Share on other sites More sharing options...
OldJack Posted August 14, 2007 Report Share Posted August 14, 2007 See my post paragraph as edit:... Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted August 15, 2007 Report Share Posted August 15, 2007 Which board are you guys refering to as 'the other board'? Quote Link to comment Share on other sites More sharing options...
veritas Posted August 15, 2007 Report Share Posted August 15, 2007 Which board are you guys refering to as 'the other board'? http://www.thetaxbook.com/forums/forumdisplay.php?f=2 Quote Link to comment Share on other sites More sharing options...
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