I own a restaurant. We donated all the proceeds for one day to a fund set up to benefit one of our employees whose house burnt down. Do we need to include the proceeds from that day in our income since we donated it all to the employees fund?

ANSWER

The BIDaWIZ Team's Answer:

The sales for that day would be treated as revenue for that as is the normal course of business. However, the amount of money paid to the employee would be treated as compensation for tax purposes which would be a deductible expense to the business. Please note though that this will be treated as a taxable income to the employee. This is referenced IRC Section 3401 and IRS Publication 15. Having said that, the employee may still be eligible to claim a casualty loss via Schedule A of their Form 1040. Specifically, the employee may deduct casualty and theft losses relating to their home, household items and vehicles on your federal income tax return. Do you know if insurance covered any of the loss?