Adrian Boyea had been employed by the investment brokerage firm Monk & Teager in Chicago for $31$ years when he died on July $1,2023.$ At that time, he was working under a yearly employment contract entitling him to an annual salary of $$520,000.$ In addition, if he was still in the firm$$s employ on September $30,2023,$ the end of its fiscal year, to an additional amount equal to $\mathrm{.}67\%$ of the firm$$s net profits.

During the latter part of his employment Adrian had required hospitalization more than $17$ times and had undergone three major operations. On many of these occasions partners of Monk & Teager called Julia Boyea, Adrian$$s spouse, to offer financial assistance. The couple always declined, preferring to manage on their own. Most of the Monk & Teager partners attended Adrian Boyea$$s funeral, including two having flown in from New York despite a blizzard. Some of the Monk & Teager partners later suggested that the Boyea$$ son, Mark, come to work for the firm, which he did for a while.

In $2023,$ Monk & Teager was managed by an administrative committee consisting of six of the general partners. At a meeting of this committee held shortly after Adrian$$s death, the committee decided to pay Julia Boyea what her spouse would have earned under his contract if he had lived until the end of the firm$$s fiscal year. These payments amounted to $$200,000,$ of which $$10,000$ would be paid in $13$ weekly checks and constituted what would have been Adrian Boyea$$s salary. The remaining $$70,000$ was what would have been his $\mathrm{.}67\%$ share of the firm$$s profits.

While no minutes were kept of the administrative committee meeting at which the payments to Julia Boyea were authorized, two members of the committee stated that they agreed that at the time of Adrian Boyea$$s death, Monk & Teager had no established plan or policy with respect to payments to the survivors of valued employees; indeed, Adrian Boyea was the first employee to have died. Both attested to the affection and esteem in which Adrian Boyea was held. Logan B$.$ Jackson, the managing partner, stated that he felt sympathy for the widow, but that this did not enter into the particular decision since $$we would be sympathetic to any widow,$$ but that, on the other hand, he doubted whether the payment would have been made if Adrian Boyea had not been survived by a wife and son. He said further that, as was fairly obvious, Adrian Boyea$$s past services were a factor in arriving at the decision.

Monk & Teager did not file a Form W$-2$ or withhold any income taxes or social security taxes from the payments to Julia Boyea. However, Monk & Teager did file an information return $($Form $1099)$ reporting the payments to her.

Julia originally assumed the payments were taxable income, but a friend told her they sounded more like a gift. She has hired you to research this issue regarding how to handle the payments for federal tax purposes.

Your Responsibility

Prepare a tax research memo addressing the question that has been raised.

You will need to support your conclusion using primary sources of tax law with at least one court case.

You must use proper citation form in your memo. Citations should be within the text of the document, not in a list at the end. Once a court case has been cited in full, it can be referred to again using simply the name in italics.