<prompt> Human: PF,The last few weeks have been an emotional roller-coaster for me. Ive learned that I am losing my job soon, however there is a big silver lining. Ive worked for a company that I now manage for a very wealthy owner for several years. He has lost interest in it and is in the process of selling the business and retiring, and he will be moving across the country soon. He has greatly valued my professionalism and values me a trusted friend. We had some very ambitious plans together for developing the business, and he feels a degree of guilt and responsibility to me for backing out of our plans, and he knows the job market is rough and it will take me some time to find the type of job I am looking for. He is intending to give me a very generous gift or severance. There are a few scenarios he is considering and depending on which one he chooses Id like some advice on the best way to handle it, especially from a tax perspective. I do intend on consulting a taxfinancial specialist but things could move very fast, and Id like some second opinions. Basic specs on me:Live in California, single male, no children, mid thirties, own a home with a very low mortgage. Net worth of around 250k, with 60k in savingsemergency fund. Current salary is approx 120k a year, with a 15 profit share, which doesnt mean much since the company will no longer be re-capitalized to get us into the stage where we would yield significant profits. I have no interest in working for the new owner or acquiring the business for myself for both personal and business reasons, which are irrelevant for this conversation. 1 The most likely scenario is a cash offer. I believe this could range anywhere from 250,000 - 1,000,000. Probably somewhere in the middle. Am I better off taking this as a gift from him personally or as a severance from the business? In either scenario, are there any giant miss steps I should avoid? 2 He personally owns a rental property in my area. It is currently leased, but the lease is expiring soon and the tenants are planning on moving out. It is worth around 600k. He may just give this to me, that way it is one thing less on his plate to deal with before he moves.Despite the generous gift, Im saddened that my involvement in the business is ending, yet I know I am extraordinarily fortunate in receiving his generosity. There is a lot of grey area between our friendship and our business relationship. My employment agreement does not specifically require me to have a severance, so I think it could swing either way. My primary concern at this point is determining the best way for this giftseverance to be given to me, mainly from the tax perspective. I probably will not know his decision until he either hands me the check or the deed. Ill worry about planning out the rest after I get it, I dont want to put the cart before the horse. Thank you for your input.  <response>: Transactions between an employer and employee and presumed to be taxable compensation. There is a very high standard to overcome and claim that it is a gift. You would need a tax lawyer to be involved and even then youd be taking a major risk trying to call it a gift. The statute of limitations would run for 6 years a special 6 year limit applies if you underreported income by more than 25. Attempts to disguise payments are unwise. It is pretty clear that this payment would arise in connection with your services as an employee. The result is the same regardless of whether you get cash, a house, bitcoin, gold bars, etc. Also if he is wealthy I would be surprised if hed be willing to give up some of his lifetime gift tax credit to make the gift. Additionally, calling it a gift means the company loses the tax deduction on the payment. 