Taxability Of Lottery Tickets As Gifts To Employees

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s About Taxes)/Taxability of Lottery Tickets as Gifts to Employees Advertisement Expert: John Stancil, CPA - 10/17/2012 John,

I am a CFO and we traditionally have given gift cards as Christmas gifts which we include as taxable wages in their W-2.  Our employees have been complaining about receiving gifts that are taxable so I thought perhaps we could give $20 worth of lottery tickets instead, but I cannot determine if these should also be includable as taxable wages.  The IRS guidance refers to de minimus fringe benefits are not taxable, but cash and cash equiavalents are always taxable no matter the value.  Would lottery tickets be considered de minimus not subject to tax or would they be considered cash equivalents?

Thank you,

Bryan Anderson

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Bryan,

Thanks for your question.

In order to be taxable, the gift must be cash or convertible to cash.  Since a lottery ticket is not convertible to cash, I do not see that it would be taxable income to the employee if under $25.  However, as you know, any winnings would be taxable income to the employee, but that's not your problem.

As an aside, when I was researching this, I found that lottery tickets are often not considered by the employees as desirable gifts.

Hope this helps.

John Stancil, CPA