At Issue

At this time of year, we are often asked about whether the value of a turkey, ham, or other item of merchandise purchased by an employer and distributed generally to each of the employees of an organization at Christmas, or a comparable holiday, constitutes wages subject to income tax withholding or income subject to tax for income tax purposes.


Our friends at Denali Christian College (DCC), a private college under I.R.C. section 501(c)(3) and 170(b)(1)(A)(ii), has historically given each employee a 16-18 pound turkey on the Tuesday before Thanksgiving each year. The modus operandi is for a delivery truck to bring the “birds” to campus and they are bagged up and brought to each employee’s desk by the President and Head Basketball Coach of the college, with a personal “Happy Thanksgiving – we are very thankful for you!” handshake – or hug.

We received a call from Millard, DCC’s Controller, asking if they would “be forced to include the value of the turkeys in each employees taxable compensation for the year”. And, if so, how would they put a value on the turkeys?

We tell Millard that it is a great thing that they gave away “birds” and not gift cards. Pursuant to several rulings, holiday gifts of turkeys or hams will generally be considered “de minimis fringe benefits” and not subject to employment taxes.


Rev. Rul. 59-58 states:
“It is accordingly held that the value of a turkey, ham, or other item of merchandise of similar nominal value, distributed by an employer to an employee at Christmas, or a comparable holiday, as part of a general distribution to employees engaged in the business of the employer as a means of promoting their good will, does not constitute wages subject to income tax withholding or wages for Federal Insurance Contributions Act or Federal Unemployment Tax Act purposes.”

“…The foregoing rules will not apply to distributions of cash, gift certificates, and similar items of readily convertible cash value, regardless of the amount involved.”

Form 990, Part IX Instructions:
Line 9. Other employee benefits. Enter contributions by the filing organization, common paymasters, and payroll/reporting agents to the filing organization’s employee benefit programs (such as insurance, health, and welfare programs that are not an incidental part of a pension plan included on line 8), and the cost of other employee benefits.
For example, report expenses for employee events such as a picnic or holiday party on line 9. Do not include contributions on behalf of current or former officers, directors, trustees, key employees or other persons that were included on line 5 or 6.

Bottom Line

There are a lot of “opinions” floating around when it comes to employee holiday gifts. The laws on “de minimis fringe benefits” are covered in Treasury Regulation 1.132-6(e). You do not want to include amounts in an employee’s W-2 if you don’t have to. Always watch out for “gifts” that are “readily convertible to cash value.” Check with your tax advisors for clarification.

Specific questions? Email Dave Moja.


The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.