No Deduction for Bonuses to Owner’s Children

Parents who ran a successful embroidery business paid their children to work for them: cleaning the office, working with inventory, and cleaning machines. They compensated them with small amounts throughout the year and bonuses in December based on the performance of the business and not on an hourly or salary basis. The Tax Court allowed a deduction for the small amounts, but not for the bonuses. The bonuses were not what would typically be paid to an employee who was not related to the owners.

Open
Close

Big Ideas for Small Business®
Find it for free on the App Store.
Get