Death benefits. After a brief illness, bill died. Bill%u2019s employer paid $20,000 to his widow. The corporation sent along a letter with the check indicating that $5,000 represented payment for Bill%u2019s accrued vacation days and back wages. The balance was being awarded in recognition of Bill%u2019s many years of loyal service. The company was obligated to pay the accrued vacations days and back wages, but the balance was discretionary.

a. is the employer entitled to deduct the $20,000 paid to Bill widow?

b. is Bill%u2019s widow required to include the $20,000 in her gross income?