[Kevin]

Originally Posted by preciousjeni

You've misled us, friend.

Okay, you made me go reread the case to verify I have not misled you. The cite is C.I.R. v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190 U.S. (1960), btw.

While realistically, the IRS (then CIR) probably would never have known the transaction happened if Mohawk hadn't reported the gift as a business expense, that's not what the case turns on.

The Court was quite explicit on that point:

"The Government says that this ‘intention’ of the transferor cannot mean what the cases on the common-law concept of gift call ‘donative intent.’ With that we are in agreement, for our decisions fully support this. Moreover, the Bogardus case itself makes it plain that the donor's characterization of his action is not determinative-that there must be an objective inquiry as to whether what is called a gift amounts to it in reality. 302 U.S. at page 40, 58 S.Ct. at page 64. It scarcely needs adding that the parties' expectations or hopes as to the tax treatment of their conduct in themselves have nothing to do with the matter. (emphasis added) Duberstein at 286, 1197."

The case, rather than turning on the donor's characterization of his action, turned on the donor's intent. The Court clearly describes this 'intent' test:

". . . if the payment proceeds primarily from the constraining force of any moral or legal duty, or from ‘the incentive of anticipated benefit’ of an economic nature, it is not a gift. And, conversely, where the payment is in return for services rendered, it is irrelevant that the donor derives no economic benefit from it. A gift in the statutory sense, on the other hand, proceeds from a ‘detached and disinterested generosity, out of affection, respect, admiration, charity or like impulses." Id at 286, 1197, citing [various other cases which you if you really, really, really care, I can cut/paste you a long string cite]

At any rate, no, I did not mislead. While I haven't looked at the Wikipedia article, if that's its conclusion, then I don't agree with it. The question here is was the 'hospitality' of the De Lauros something offered charitably and disinterestedly, or rather, was it a manner of payment or done with the intent of encouraging future services. Since services were in fact rendered by Emanuel to benefit the De Lauros, you do the math.