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Is the vacation package taxable compensation?

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The company paid for flights, cruise, hotels and meals, during vacation, for an employee and his entire family. These expenses were part of an agreement with the employee to work for 6 months more. Are these expenses taxable compensation ?

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Yes, it was compensation.

If he were doing work and brought his family, then his part that was work related would not be; but this is not the case presented.

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

Ditto with Wayne's comment:
-If you are travelling to do business (for the majority of the time you are travelling from a working hours point of view), then even if you take a weekend off to see the sights, that isn't comp and isn't taxable.
-If you bring your family with, then the *increment* for their travel is taxable.
-If you aren't travelling for business purposes, then the whole thing becomes taxable.

To be explicit, "Vacation" isn't a legitimate business purpose.

KP

Topic Expert
Malak Kazan
Title: VP, Special Projects
Company: ERI Economic Research Institute
(VP, Special Projects, ERI Economic Research Institute) |

I would add this is generally explained as "non-cash" compensation reflecting the portion that was of "personal benefit" to the employee (i.e. his family joining him during the business travel) which results in imputed income added to their pay.

Anonymous
(CFO) |

More importantly, as the OP indicated that the company paid for "his entire family", all expenditures incurred are in fact considered compensation to that employee.

Good luck trying to exclude some from taxability with "he was doing work". The inclusion of friends and family as well as the absorption of the costs, pretty much points to personal intent over business expenditure.

Where on earth do companies come up with this kind of stuff?

It seems that as I enter the last few years of a career spanning more than 35 year, I encounter these kinds of situations more and more. Worse, ever time I do there is some well meaning exec arguing that it isn't a taxable transaction and I face their wrath for bringing up the proper treatment.

And don't forget, I'm in the public sector where the ethics are supposed to be even more rigorous and such types of non-direct comp payments that are outside of any reasonable guidelines can be considered gifts of public funds which can and has, actually resulted in criminal prosecution.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I just talked to a company that does some type of internal lottery (based on a whole bunch of factor having to do with anniversary years) where that person and family is sent on a paid vacation. And it is considered a vacation by the company!

They include the cost of that vacation (amounts paid by the company) as taxable income to the employee.

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