Payments made after December 31, 1986 by an employer “to, or for the benefit of” an employee are not excludable as gifts, however.4 Thus, a death benefit paid by an employer after December 31, 1986 would appear to be a payment for the benefit of an employee and, if so, would be taxable compensation not an excludable gift. Employee death benefits that are payable by reason of the death of certain terrorist attack victims or astronauts are excludable from gross income.5
To be deductible by the employer, a voluntary death benefit must qualify as an ordinary and necessary business expense.6 Payments will be deductible, therefore, if the circumstances show that they are additional reasonable compensation for the employee’s services, or otherwise qualify as an ordinary and necessary business expense.7
The deduction will be denied if the facts indicate that the payment was purely a gift or was made for the personal satisfaction of the directors.8