§74(c) and §274(j) – employee can exclude an employment achievement award while the employer gets a deduction.
Award must be for length of service or safety achievement. §274(j)(A)
If cost is fully deductible under §§162 and 274(j) then fair market value of the award (not cost) is excludible from income. §74(c)(1)
If part of cost is not deductible because it exceeds limitations in §274(j) ($400 or $1600) then employee must include part of the cost or the value that exceeds deduction.
Except for these sections, employment achievement awards are part of income under §61(a)(1). Leg history p. 107. – giving length of service or safety achievement awards might affect certain de minimis fringe benefits under §132(e) purportedly given for same reason.
Commissioner v. Glenshaw Glass Co. – does money rec’d as exemplary damages/punitive part of treble damages have to be reported as gross income? Yes. Court finds that §61 is broad and includes everything unless specifically excluded, including this.
“Accessions to wealth, clearly realized and over which the taxpayers have complete dominion.”