Gifting to an employee

[Hiker285]

When gifting to an employee a property valued at $300,000, are there other tax issues besides filling out a gift tax return?

[IRonMaN]

I think it will involve a 941 instead of a 709.  Employers don't gift but they do pay wages in appreciation of the employee's services.

[abctax55]

So... is that paycheck a 'bonus' in terms of the withholding (28%?) that'll show up on the W-2?

And maybe the $ 300,000 is going to have to be grossed up for the withholding, the SS & Medicare?

[Just-Lisa-Now-]

Maybe you want to elaborate on this gift and the employer/employee relationship?

[BobKamman]

Nelson Rockefeller gave Henry Kissinger a gift of $50,000 in 1974 when Kissinger left his employment for a new job as Secretary of State. 

Rockefeller filed a gift tax return and paid gift tax.

$50,000 in 1974 would be worth $300,000 today.  More, if you had invested it in WalMart.  

[Hiker285]

The bonus is a piece of property the owner will be giving to the employee for his years of service.

[Hiker285]

The employer will be giving the employee a piece of property - real estate - as appreciation for his years of service.

[Accountant-Man]

Wages.

[TaxGuyBill]

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@Hiker285 wrote:

as appreciation for his years of service.

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That is called a "bonus".  It is taxable to the employee (both income tax and FICA, and will be on the W-2) and the employer can deduct it as "wages" (and will pay any employer side of FICA).

I'm trying to wrap my head around this, but I'm wondering if it is ALSO a deemed sale by the employer.  So if the Basis of the property is $200,000 and the employer is claiming a $300,000 deduction as wages, it seems to me the employer would also report a deemed sale on 8949/Schedule D showing a profit of $100,000.

Does anybody have any thoughts about that?

[IRonMaN]

Yes, he would potentially report a gain on the disposition.

[TaxGuyBill]

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@IRonMaN wrote:

Yes, he would potentially report a gain on the disposition.

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Thanks.  That is what seemed logical to me, but I don't remember coming across that situation before.

[Hiker285]

The employer would gift the property at the employer's basis so no gain.  It does, however, look as though this is a wage bonus and not a gift for Form 709.  Everyone's responses are greatly appreciated.

[IRonMaN · Accepted solution]

But if the property is worth more than its book value, he has a gain to report.  He can’t choose to report it at book value.

[Hiker285]

Thanks so much for everyone's replies, I really appreciate this.

[Hiker285]

Thanks so much for everyone's replies.  I really appreciate this.