Question - You are lucky to have won a new automobile, received a gift from a rich Aunt, won an award for literary achievement, and your employer just notified you, on the day you are retiring, that he was giving you $30,000 for your 25 years of outstanding service.
Briefly discuss:
• The tax consequences of each;
• Which result in the least amount of gross income; and
• What could be done to minimize your gross income?
Why might your employer want to consider the payment a bonus while you prefer to consider it a gift?