Funeral Expenses

[Bart]

Can a regular C corp pay for the funeral expenses for one of it's employee's relatives and deduct the costs?

[Margaret CPA in OH]

No research here but I can't imagine that the expense would qualify as "ordinary and necessary," the criteria for a deductible business expense. I also wonder if the payment would have to be considered as compensation to the employee. Hmmm, good question, Bart, and I am interested in other input.

[rfassett]

I concur with Margaret. Unless it is an ordinary and necessary expense for that business, it would not be deductible unless it was run through as compensation to the employee. And funeral costs would go way past any diminus rules for business gifts. The only way I would imagine it could work is to write a check to a charitable organization (such as a church) and then if that organization saw fit to pay the funeral expenses that would be nice, but the charitable organization would not be under any compulsion to do so. That might be the most logical. If it is run through as additional compensation for the employee, there would be payroll taxes and worker's comp expenses also.

[Margaret CPA in OH]

The charitable angle might work but keep in mind that deductible contributions are limited to 10% of the C corporation's taxable income. And, as Ron pointed out, the contribution cannot be designated to benefit any specific individual.

[jainen]

>>Can a regular C corp pay for the funeral expenses for one of it's employee's relatives and deduct the costs? <<

Certainly. I don't understand the previous responses that say it is not deductible but then explain how it is deductible. In my opinion, it should be obvious they can deduct it as a taxable fringe benefit. If they don't want to put it on the W-2, they can still pay it out of corporate earnings and deduct it on their books. In that case it would simply be another item to reconcile to the tax return at the end of the year. In my opinion, it isn't a big deal either way.

This is another example of how tax effects should not be the most important factor.

[rfassett]

I guess I mis-interpreted the question. Since the question was asked on a tax board, I assumed the question was "could the costs be deductible for tax purposes". You are, of course, correct jainen, there is no limits as to what a corp can deduct for book purposes so long as the officers and/or shareholders approve. Not sure I agree, however, that payment for an employee's relative's funeral expenses could be a taxable fringe benefit. I guess we need to know how close the relationship line runs.

[Margaret CPA in OH]

Thanks again, Jainen, for pointing out the less obvious (to me, anyway). I, too, interpreted the question to mean deductible for tax purposes. I honestly did not believe that someone on this board would ask about a non-tax deduction. I really should know better and am glad that you do. Thanks, again.

[jainen]

>>someone on this board would ask about a non-tax deduction<<

The original post was indeed a tax question, and appropriate for this forum even if the answer had been negative. All three answers agree--the payment IS deductible on the tax return. All three answers also agree as to where on the tax return the deduction can be taken.

[michaelmars]

IF noone liked the employee maybe you could take it as an entertainment expense! Or treat it as a retirement/employee appreciation expense!

[MI_Admin]

I have a similar question as OP. Backstory: My husband and I own our own business, he is the sole employee ~ I don't get paid, at this point, for the bookkeeping duties that I do, but we both are the only Principals of the company. His brother and wife own their own company as well; same situation except she did draw a salary. Their company works as a subcontractor for our company, so we pay them per project that they work on.

Sadly, my sister-in-law recently passed away from a long battle with cancer, and my husband and I flew out of state to be a part of her funeral, and to be there for my brother-in-law and family. The relationship is close.

So, are those trip costs able to be deducted as business expenses? If so, what accounting category would I use? I don't have any that are appropriate (Marketing, Entertainment, Business Development, Gifts, etc.). Is there something like Benevolence, Bereavement, Compassion, Employee Hardship, or something like that?

Thanks for any advice.

 

[Elrod]

No..No........No....Never has been, and still isn't....Sorry...

[MI_Admin]

Let me clarify ... we paid the travel costs out of our personal account. What I am wondering is, am I able to charge it to our company books as a business expense (on our monthly expense report), and if so, what "Chart of Accounts" account would it go under in Quickbooks.  We are all Principal officers in our respective companies, their company is a subcontractor under us. I hope that is more clear.

[jklcpa]

MI Admin, we do not answer questions from the general public here. This is a privately owned forum maintained for tax and accounting professionals that mostly use one particular brand of tax software.   

Even with your unnecessary clarification, the answer is still "no".

 

[Elrod]

Cost of attending a funeral is not a business expense...........

[MI_Admin]

On ‎5‎/‎18‎/‎2010 at 10:24 AM, Bart said:

Can a regular C corp pay for the funeral expenses for one of it's employee's relatives and deduct the costs?

 

This, and the answers given, is why I thought it might be a business expense.

 

10 minutes ago, jklcpa said:

MI Admin, we do not answer questions from the general public here. This is a privately owned forum maintained for tax and accounting professionals that mostly use one particular brand of tax software.   

Even with your unnecessary clarification, the answer is still "no".

 

 

My apologies, I did not realize this was not for the general public. Have a good day.