Severance

[MGC94]

Taxpayer is a pastor. His church shut down. The church has $142,000. They would like to give it to him for his retirement and for giving 20+ years to the church. 

Should he get severance pay on a W2?

$142,000 as a gift? 

Or they also are willing to give it to another church and the new church would pay him the $142,000 over 5 years as a $28,400 salary. 

What is the best way to do this? Thank you for your help  

[rcooley25]

Unless he needs the whole 142ooo.oo right now or thinks he might not have another 5 years to live absolutely arrange for it to be apread over 5 years.

[IRonMaN]

And it goes on a W2 - there is no such thing as a "gift" when you are rewarding someone for their services.

[Accountant-Man]

When a tax exempt entity shuts down, its assets MUST be given to other tax exempt entities, charities, depending on state law. They don't have to be churches, just other 501(c)(3)s. We're in NJ.

I worked with a church whose declining membership sold the building and then started to disburse their money to other charities.

The funny bit: the church people wanted to give $$ to my synagogue, as an acknowledgement of my help to them. They gave money to a similarly-named synagogue, but we didn't get it. When the lawyer asked me to be certain, I said nope, that's not us. That's in another town.

They nicely cut another check.

[BobKamman]

Or the other church (how close is it to shutting down?) can pay it to him over a long enough period that all of it can be considered a parsonage allowance.  Is he going to retire, or move on to working for another church?