Ronald and Sue M. Leschke - Page 15




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          matching inclusion in the income of the recipient and generally             
          to prevent the deduction of personal expenditures under the guise           
          of business expenses.”  World Wide Agency, Inc. v. Commissioner,            
          T.C. Memo. 1981-419; see also H. Rept. 1447, 87th Cong., 2d Sess.           
          (1962), 1962-3 C.B. 405, 423.  Since section 102(c)(1) precludes            
          treatment of gifts to employees as tax-free gratuities, the                 
          principle of matching income inclusion and deduction will be                
          protected in situations such as that now before the Court.                  
               We therefore hold that the gift nut baskets presented to               
          employees of R&J are not gifts within the meaning of section                
          274(b) and that deduction of amounts expended to purchase the               
          baskets is not subject to the $25 limitation.  Hence, a deduction           
          of $61 is allowed for each basket given to those stipulated as              
          employees.                                                                  
                    3.  Christmas Bonuses                                             
               With respect to the $100 bills given to employees as                   
          Christmas bonuses, petitioners rely primarily on the argument               
          that the full $4,200 is deductible under section 162(a)(1)                  
          because it represents compensation paid to those employees.                 
          Alternatively, if the bonuses are characterized as gifts,                   
          petitioners aver that they are fully deductible for the same                
          reasons as were discussed above in connection with the nut                  
          baskets.                                                                    








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