This episode revisits the most-listened-to episode of The Death Readiness Podcast in 2025. Jill sits down with her dad, Carmen Mastroianni, to talk honestly about raising a child with Down syndrome over a lifetime—from the shock of diagnosis in 1977 to decades of advocacy, inclusion, planning for independence, and learning to live with worry that never fully disappears. This is not a story about flawless estate planning or financial success. It’s a story about showing up, adapting when systems fall short, and building a legacy quietly through everyday decisions that most people never see.
What You’ll Learn in This Episode
·What raising a child with special needs looked like in the 1970s, when there was no internet, limited resources, and little institutional support
·Why early intervention matters, and how one supportive professional can change the trajectory of an entire family
·How advocacy shows up in everyday moments, from fighting for inclusion in neighborhood schools to pushing back when institutions say “there’s no place for your child.”
·Why mainstreaming and community inclusion matter, not just academically, but socially, and how being known in a community can protect and empower a child.
·What independence can look like for an adult with special needs, including living in a group home, working, maintaining friendships, and making decisions about one’s own life.
·How group homes actually work, including funding, staffing, waitlists, and the realities families face as caregivers age.
·Why planning for the future is essential, especially when parents won’t always be around, and how special needs trusts fit into that picture.
·How individuals with special needs experience grief, relationships, and emotional loss, often more deeply than people assume.
·Why legacy isn’t just about money, but about advocacy, adaptability, and the quiet, persistent work of love over decades.
Resources & Links
Center for Disability Services: Residential Services
Center for Disability Services
314 South Manning Blvd.
Albany, NY 12208
518-437-5700
The Center for Disability Services is a nonprofit organization in New York that provides comprehensive support and services for individuals with disabilities. The Center played a crucial role in securing supportive housing and care for Dan. Through its commitment to inclusion and individualized care, the Center continues to provide essential resources that empower individuals with disabilities to lead fulfilling lives.
Gerald B. Healy, MD, FACS was an ear, nose, and throat specialist at Children’s Hospital in Boston who played a critical role in saving Dan’s life. Dan suffered from severe respiratory issues as a toddler—issues that local doctors were unable to diagnose. Dr. Healy identified that Dan’s airway was dangerously small due to enlarged tonsils and adenoids and recommended immediate surgery.
Kids Like These is a 1987 TV movie that tells the story of a couple who has a baby with Down syndrome. The script was co-written by Emily Perl Kingsley, a well-known advocate for individuals with disabilities, along with Allan Sloane. Kingsley, whose own son, Jason Kingsley, has Down syndrome, infused the film with real-life experiences to highlight the struggles and triumphs of parenting a child with special needs.
One notable detail from the movie was inspired by Dan’s mother, who once shared a story with Emily Perl Kingsley about Dan being denied a library card because he couldn’t sign his name. This real-life event was later referenced in the film, illustrating the systemic barriers faced by individuals with disabilities and the importance of advocacy.
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The Death Readiness Podcast
Episode: 53
Title: Why that holiday “thank you” might be taxable
Host: Jill Mastroianni (Solo)
Published: December 23, 2025
Jill Mastroianni (00:00) The holidays are a time for generosity but not every “gift” is treated the same by the IRS. In this episode, I break down what happens when cash gifts are given to employees or independent contractors, and why the tax rules here are very different from gifting to family.
Year-end bonuses are taxable. But what about gift cards, branded swag, or “thank you” cash? And does the IRS treat the bonuses Taylor Swift handed out on the Eras Tour the same way they treat a holiday gift from your boss?
If you’re giving or receiving this holiday season, especially through work, this episode is worth a listen.
(00:43) Welcome to the Death Readiness Podcast. This is not your dad’s estate planning podcast. I’m Jill Mastroianni, former estate attorney, current realist, and your guide to wills, trusts, probate and the conversations no one wants to have. If your Google search history includes, “Do I need a trust?” “What exactly is probate?” and “Am I supposed to do something with mom’s Will?” you’re in the right place.
A few days ago, after a disappointing email and a very ill-advised lunch choice involving leftover Chinese food, I decided to go for a run. I brought along our smallest dog, bundled him into his red winter coat, and assumed that running would solve everything, including his cold intolerance.
It turns out he hates walking in the cold, and he also hates running in the cold. So there I was, jogging in place and gently encouraging what looked like a miniature dog Santa, realizing that good intentions don’t always produce the results we expect.
(01:50) And that’s actually a perfect setup for today’s question. Because when it comes to the IRS and holiday gifts to employees, good intentions don’t carry much weight either.
The holidays are a time when people are trying to do the right thing—give generously, say thank you, and take care of the people they love.
But when your generosity meets legal rules, systems and paperwork, clarity is what makes the difference.
That’s exactly why I created The Death Readiness Playbook. It’s the resource I wish every family had before they needed it, and it’s available now at deathreadiness.com/playbook.
That’s deathreadiness.com/playbook.
(02:33) Today, we’re talking about gifts made in the context of work.
Today’s question comes from Tiffany, a small business owner. She wants to give holiday cash gifts to her employees and independent contractors.
She’s wondering two things: #1. Do the people receiving those gifts need to include them in their taxable income?
#2. And can her business deduct those gifts?
During the holidays, a lot of people like to give gifts—sometimes to family, sometimes to employees or independent contractors. And many people assume those gifts aren’t taxable to the person receiving them.
If you’ve been listening for a while, this might sound familiar. You may remember Episode 46, How to Give Money Without Triggering Gift Tax.
Today’s episode is also about “gifts,” but the tax treatment here is very different from what we talked about in Episode 46. So before I answer today’s question, I want to quickly review what that earlier episode covered—and, more importantly, why it doesn’t apply here.
(03:39) In Episode 46, I was talking about the federal gift tax: when it applies, when it doesn’t, and when the person making the gift has to pay it.
I used this example: let’s say I give my cousin a brand-new car, and she thanks me with a handwritten note and a homemade pie. It’s a sweet and very thoughtful gesture. But the pie is worth a lot less than the car so the IRS still considers the car a taxable gift.
I’ll link to Episode 46 in the show notes if you want a deeper dive into how the gift tax works and whether it’s something you actually need to worry about.
So here’s the key distinction: In Episode 46, the listener was asking about giving gifts to family members, specifically nieces and nephews.
Today, Tiffany, a small business owner, is wondering if the holiday gifts she gives to her employees and independent contractors are taxable to them and deductible to her business.
(04:34) Before I answer Tiffany’s questions, I want to pause for a quick clarification because there’s generally some confusion around the difference between an employee and an independent contractor. Even though it’s not the main point of today’s episode, I want to touch on it briefly.
So, what’s the difference between an employee and an independent contractor?
An employee works inside a business. The business tells the employee what work to do, how to do it, and when to do it. The company typically provides the tools, training, and ongoing direction. Employees are part of the day-to-day operations, and the business handles things like payroll taxes, benefits, and workers’ compensation.
When I worked at a law firm, I was an employee. I showed up every day, all year long. I was told what to work on, how to handle it, and when it was due.
(05:25) An independent contractor, on the other hand, runs their own business. They’re hired to deliver a specific result, not to be managed step by step. They decide how the work gets done, use their own tools, set their own schedule, and often work for multiple clients at the same time. They’re responsible for their own taxes, insurance, and expenses.
For example, when we hired a plumber to fix a drain in our bathroom, she was working as an independent contractor. She had her own business. We hired her for one specific job—to fix the drain. She brought her own tools, decided how to fix the problem, fixed the problem, and then she left. She doesn’t work for us, and we don’t pay taxes or provide benefits on her behalf.
Now, here’s the important part for today’s episode: Even though employees and independent contractors are different, for this question, they’re treated the same under the tax rules we’re talking about.
So to keep things simple, I’m going to use the word “employee” going forward. Just know that when I say “employee,” I’m also including independent contractors.
(06:33) With that in mind, let’s go back to Tiffany’s question.
Tiffany is a small business owner who wants to give holiday cash gifts to her employees. She’s wondering whether her employees need to include the gifts in their taxable income—and whether she can take a deduction for the gifts herself.
This question is different from the one in the earlier episode because now we’re not talking about the gift tax. We’re talking about the income tax.
So let’s take a quick look at the Internal Revenue Code, specifically Section 102.
I’m not going to rattle off code sections throughout the episode, but if you want to see the sources behind what I’m explaining, you’ll find links to the relevant Internal Revenue Code sections and cases in the show notes.
Section 102(a) says that if you receive a gift or an inheritance, the value of what you receive is not included in your income.
(07:29) So going back to my earlier example, if I give my cousin a car, she doesn’t include the value of the car in her income. She doesn’t pay income tax on it. And if I inherit a house from my uncle, I don’t include the value of that house in my income either. Both of those fall squarely under Section 102(a).
But Tiffany’s situation is different.
Her gifts fall under Section 102(c), which deals specifically with gifts from employers to employees. And Section 102(c) says that the general rule in Section 102(a) does not apply with regards to gifts from employers to employees.
In plain English: when a gift is given by an employer to an employee, the default rule is that the employee must include the value of that gift in their taxable income. And, these gifts are tax deductible to the employer.
(08:27) There are exceptions to this rule, but they’re limited and fact-specific, and most of them don’t apply to Tiffany’s situation. I’ll give you a quick sense of what those exceptions look like, without disappearing too far down the rabbit hole.
One common exception is known as de minimis fringe benefits.
A de minimis fringe benefit is a small and occasional gift, something so minor it would be unreasonable to track for tax purposes. For example, on my first day at a law firm, I was given a backpack and an umbrella. That’s de minimis.
But gift cards are excluded from this de minimis exception. When that same firm later gave me Amazon gift cards, those were included in my taxable income. Even if the gift card had roughly the same value as the backpack, it’s a cash equivalent. The IRS can see the dollar-for-dollar value immediately, and that matters.
(09:32) Tiffany wants to give cash gifts. That means her gifts don’t qualify as de minimis fringe benefits, regardless of how much, or how little, she wants to give.
So without more specific facts that would indicate another exception could apply, Tiffany’s employees are going to need to include their holiday cash gifts in their income. For independent contractors, Tiffany would report the gift in a Form 1099 and she would include the gift to employees in their Form W-2.
But let’s add some hypothetical facts and make this more interesting.
Let’s say Tiffany has an employee, Michelle, who’s worked for Tiffany for 20 years. Can Tiffany treat a holiday cash gift as a non-taxable employee recognition award for Michelle’s 20 years of service?
I’ll answer that by telling you a story.
(10:29) When I was working on a complicated tax matter at a large law firm, I stopped by the office of a very senior tax attorney to talk it through. He had been at the firm for 40 years. And I’m not convinced the stack of papers on his desk had moved since the day he arrived.
Sitting on top of that pile was an envelope that said, “Congratulations on 40 years of service.” I asked him what it was. He shrugged and said, “Probably just a card.” I asked if I could open it, and he said sure.
Inside were forty one-hundred-dollar bills—one hundred dollars for each year he’d worked at the firm. That’s four thousand dollars. And I’m certain it would never have been opened if I hadn’t asked.
Now, there is a special category of gifts called employee achievement awards, which can be income tax-free for the employee but only if very specific requirements are met.
(11:31) Even though employee achievement awards can be given for length of service, such as my colleague’s 40 years of service, the favorable tax treatment only applies to tangible personal property, things like a watch or a grandfather clock. Cash does not qualify. And there’s also a dollar cap: an employee can only exclude from income the amount the employer is allowed to deduct, which cannot exceed $1,600.
My colleague’s gift failed on both fronts. It was cash, and it exceeded the limit.
So, there are two lessons to take from that story before we go back to Michelle.
First: open your mail.
Second: if my colleague hadn’t allowed me to open that envelope, he would have paid income tax on the $4,000 gift from the firm, even if he never knew he received it.
Now let’s go back to Tiffany’s fictional employee of 20 years, Michelle.
(12:33) Can Tiffany treat Michelle’s holiday cash gift as a non-taxable employee achievement award?
No, she can’t.
As I mentioned, employee achievement awards can be excluded from income, but only up to a limit that can’t exceed $1,600, and only if very specific requirements are met. One of those requirements is that the award must be tangible personal property. Cash doesn’t qualify. Michelle’s gift is cash, so it fails right out of the gate.
There’s another problem, too. The tax code requires that an employee achievement award be given as part of a quote “meaningful presentation,” with a company banquet or retirement party, and under circumstances that don’t look like disguised compensation.
Even if Michelle’s gift weren’t cash, which it is, nothing in our fact pattern suggests that Tiffany is making the award as part of a meaningful presentation honoring Michelle’s service.
(13:37) And if Tiffany is also giving other employees holiday cash gifts, it would be very difficult to argue that Michelle’s gift isn’t really just compensation by another name.
So that’s my long way of saying this: Even though Tiffany is genuinely grateful that Michelle has worked for her for 20 years, Michelle would still have to include the holiday cash gift in her taxable income.
Now let’s layer in one more fact to make this more interesting.
Earlier, I mentioned that Tiffany’s situation is different from the one in Episode 46 because that earlier question involved gifts to nieces and nephews, not to employees. But what if those two worlds overlap? What if Tiffany’s niece Katie works for her?
Tiffany’s gift to her niece, Katie, who is also an employee, can be excluded from income, but only if the purpose of the gift can be substantially attributed to the family relationship, and not to the employment relationship.
(14:39) So let’s look at two versions of that hypothetical fact pattern.
If Tiffany gives all of her employees, including her niece Katie, a $500 cash holiday gift, that gift can’t be attributed to the family relationship. It’s clear that Katie is receiving the money because she’s an employee. In that case, the $500 would be taxable income to Katie.
But now let’s change the facts a bit.
Let’s say Katie worked for Tiffany while she was earning her undergraduate degree. When Katie graduates from college, Tiffany gives her a $2,000 cash gift. And let’s assume Tiffany didn’t give $2,000 cash gifts to any other employee for graduating from college.
Under those facts, there’s a strong argument that the gift was made because Katie is Tiffany’s niece, not because Katie is Tiffany’s employee. In that case, the $2,000 cash gift should not be included in Katie’s taxable income.
(15:38) Now let’s take this one step further and really tie it back to estate planning.
Imagine Tiffany is working on her Will. She wants to leave $10,000 to each individual who has been employed by her for at least two years as of the date of her death.
To analyze whether those transfers are taxable income to the recipient beneficiaries, we need to talk about the most important U.S. Supreme Court case on this issue, Commissioner of the IRS v. Mr. and Mrs. Duberstein, decided in 1960.
The Duberstein case sets the standard for how courts decide whether a transfer within the context of a business relationship counts as taxable income to the recipient. And as the Supreme Court made clear, there’s no bright-line rule. In the Court’s words, deciding whether something is included in taxable income requires looking at all the facts and circumstances.
(16:38) Here’s what happened.
Mr. Duberstein was the president of a company called Duberstein Iron & Metal Company. His company did business with another company, Mohawk Metal Corporation, whose president was a man named Mr. Berman. The two companies regularly bought metal from and sold metal to each other.
From time to time, Berman would ask Duberstein whether he knew of potential customers that Duberstein’s company didn’t want or need. Duberstein shared the names of possible customers, without asking for or expecting anything in return.
Some of those referrals turned out to be extremely valuable to Mohawk Metal. Berman wanted to show his appreciation so he gave Duberstein a Cadillac.
Duberstein didn’t ask for the Cadillac and he didn’t want the Cadillac. In fact, he already owned a Cadillac. But after Berman insisted, he accepted it.
(17:37) Here’s where things get interesting.
Mohawk Metal deducted the value of the Cadillac as a business expense on its corporate tax return. Duberstein, on the other hand, did not include the value of the Cadillac in his income. He treated it as a gift.
And that difference in treatment created the tax controversy.
So was the Cadillac really a gift?
The Supreme Court said the key question is whether the transfer was motivated by what it called “detached and disinterested generosity.” And the Court emphasized that answering that question is factual; it has to be decided case by case, based on the full context of the relationship.
When there’s an underlying business or employment relationship, the Court said, there’s a strong presumption that a transfer is connected, at least in part, to past services or anticipated future benefits, rather than pure generosity, or, as the court would say, “detached and disinterested generosity.”
(18:41) That’s exactly how the Court ruled in Duberstein. Even though there was no legal obligation to give the Cadillac, the Court concluded that it was really compensation for past services, or an incentive for future ones.
In other words, the value of the Cadillac should have been included in Mr. Duberstein’s taxable income.
So how does that analysis apply to Tiffany’s situation?
Let’s go back to our facts. Tiffany is working on her Will, and she wants to leave $10,000 to each individual who has been employed by her for at least two years as of the date of her death.
The key question under Duberstein is whether Tiffany is making the gift with quote “detached and disinterested generosity.”
Tiffany is defining the group who will receive her gifts based entirely on their employment relationship, specifically, the length of time they worked for her. That makes it very difficult to argue that these transfers are motivated by detached and disinterested generosity. Instead, they’re tied directly to past service.
(19:47) Under that analysis, each $10,000 transfer under Tiffany’s Will would be treated as taxable income to the beneficiary employee.
And I’ve seen this play out in real life.
A few years ago, I was doing estate planning for a prominent attorney in Nashville. He wanted to leave money to a household employee and a personal assistant, and he wanted the Will to expressly thank them for their service. The language he proposed was something like, “I give the sum of $50,000 to Nancy Smith, in acknowledgment of her long and devoted service.”
I advised him against wording the bequest that way, because tying the gift directly to service would very likely require Ms. Smith to include it in her taxable income.
(20:32) He was skeptical. He didn’t practice in tax or estate planning, and the rule didn’t intuitively make sense to him.
So he raised the question with my supervisor, who had been practicing estate planning for more than thirty years. My supervisor initially agreed that it felt wrong, but to his credit, he took the time to double-check. I showed him Duberstein and the relevant Internal Revenue Code provisions, and that settled it.
This is one of those areas where the rules don’t always line up with what feels fair or logical. But when it comes to gifts connected to work or service, how you describe the gift, and why you’re making it, matter just as much as the dollar amount.
The holidays are full of generosity, good intentions, and thank-yous that come from a genuine place. But as we’ve seen today, intention and outcome aren’t always the same, especially when taxes, rules, and paperwork are involved.
(21:30) If you want a way to turn good intentions into real clarity, The Death Readiness Playbook is available now. The digital version is $27, and you can find it at deathreadiness.com/playbook. It’s the resource I wish every family had before they needed it. That’s deathreadiness.com/playbook.
Because clarity is a gift the IRS doesn’t tax.
Thanks for listening today.
This is Death Readiness, real, messy and yours to own. I’m Jill Mastroianni and I’m here to help you sort through it, especially when you don’t know where to start.
Hi, I'm April, Jill's daughter. Thanks for listening to The Death Readiness Podcast. While my mom is an attorney, she’s not your attorney. The Death Readiness Podcast is for educational and entertainment purposes only. It does not provide legal advice. For legal guidance tailored to your unique situation, consult with a licensed attorney in your state. To learn more about the services my mom offers, visit DeathReadiness.com.