What a kind gesture.
Too bad the IRS is now licking its chops waiting to get a piece they didn’t earn.
I’m guessing that the appropriate taxes were withheld from their checks.
If the payment is a gift, it’s not taxable to the recpient.
A family friend built a tire-distributorship business from nothing, starting in his 20s. When he was in his 60s, he sold it. He was always a generous employer to his long-term staff, but he distributed a pretty big share of the sale proceeds to those people who had been with him, even though they had no ownership stake. He recognized all these trusted people helped him build the business from which he profited.
According to IRS
How do I avoid gift tax?
Two things keep the IRS’s hands out of most people’s candy dish: the annual exclusion ($15,000 in 2021 and $16,000 in 2022), and the lifetime exclusion ($11.7 million in 2021 and $12.06 million in 2022).
Stay below those and you can be generous under the radar. Go above, and you’ll have to fill out a gift tax form when filing returns — but you still might avoid having to pay any gift tax.
The ex-owner would pay any tax but can use his lifetime exemption to cover most or all of the tax due as long as he can also cover gifts/ estate taxes for his family under the exclusion.
From HR Block
“Winnings are Different”
Taxes on winnings should be reported as ordinary income? Generally, the U.S. federal government taxes prizes, awards, sweepstakes, raffle and lottery winnings, and other similar types of income as ordinary income, no matter the amount. This is true even if you did not make any effort to enter in to the running for the prize. Your state will tax the winnings too, unless you live in a state that does not impose a state-level income tax.