1. (1) Bonus or other post-employment payments made by an employer to his employee in the military service are considered to be compensation for services and includable in gross income, where the plan and agreement are that the employee is to return to his position when discharged from military service. If the payments are made as a gift, then the payments are not includable in gross income of the recipient. The deduction by the payer of the payments as a business expense is prima facie evidence that the payments are not gifts.

2. (2) Payments made by an employer to the widow of a deceased officer or employee as additional compensation, in recognition of and in consideration of services of said deceased officer or employee, are includable in the gross income of the widow.

   1. (b) If the payments represent a purchase or cancellation of the deceased partner's interest in the partnership, gain or loss will be recognized as provided in §40-18-8, Code of Ala. 1975.
   2. (c) Any payments which constitute a gift from the partnership to the widow are not includable in gross income.

   (3)(a) Payments received by the widow of a deceased partner from a partnership are includable in gross income to the extent the payments represent a distribution of profits.

Author: Ann F. Winborne, CPA, John Danziger, Rebecca S. Whisenant

Statutory Authority: Code of Ala. 1975, §§40-2A-7(a)(5), 40-18-14.

History: Amended: June 17, 1988; filed July 27, 1988. Amended: Filed September 18, 1996; effective October 23, 1996. Amended: Filed May 3, 2000; effective June 7, 2000.