Discussion:Grease Payments
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Discussion Forum Index --> Basic Tax Questions --> Grease Payments
Discussion Forum Index --> Tax Questions --> Grease Payments
| 23 September 2008 | |
| Sounds like a bribe to me, as in "grease the wheels", "greasing the skids".
How is it being used in the context of what your are working on? Tom | |
| 23 September 2008 | |
| I am sending an employee to a community college and she is taking a tax class. One of the questions on a test is, "Susan is a sales representative for a U.S. weapons manufacturer. She makes a $100,000 "grease" payment to a U.S. government official associated with a weapons purchase by the U.S. Army. She makes a similar payment to a Saudi Arabian government official associated with a similar sale. Neither of these payments is deductible by Susan's employer." Is this true or false. The book for the class does not address the term "grease" payment? | |
| 23 September 2008 | |
| Thanks!!!!!!!!!!!!!!!!!! Tax instructor will be impressed. | |
Beangrinder (talk|edits) said: | 23 September 2008 |
| Seems the question is getting at the deductibility of illegal activities - which is never deductible, as I understand. And on the other side - the income received from this grease payment by the US government official would be included as income.
But you could also look at this "grease" payment as a sales discount to make the sale and not illegal but regular business practice. Seems like a poorly written question without proper definition of "grease".. | |
| September 23, 2008 | |
| Since the payments were made by Susan personally, not by her employer, they can't be deducted by her employer regardless. | |
| 23 September 2008 | |
| FYI:
If you want the reference look here: Sec. 162. Trade or business expenses Specifically (c)(1) Tom | |
| 23 September 2008 | |
| Thanks Tao - That is what I love about this forum - I learn things that I can use in the future. Next time my client asks me about a "grease" deduction I will be ready! | |
| 21 October 2008 | |
| According to the instructor and the authors of the book for the tax class, the payments to Saudi Arabian government official are deductible. We(the U.S) have an agreement with the Saudi's!!!!!!!!!!!! Put that in your pipe and smoke it. lol | |
| 21 October 2008 | |
| Instructors can be wrong. Legal transactions with Saudis are okay, but illegal ones are not. | |
| 21 October 2008 | |
| More likely they are right and that the payment to the Saudi is legal under Saudi law therefore deductible against US income. Note that Saudi law is tailored to the US Tax Code. Rather than charge royalties on oil production (which would be a deduction against income) they collect the same amount as a tax so that there is a credit. | |
| 21 October 2008 | |
| The payment made to the U.S. official is specifically illegal. The payment to the Saudi may or may not be illegal. The governing document is the Foriegn Corrupt Practices Act. And, no, I have not recently, last 15 or so years, researched that document, so I can't quote chapter, page, etc. | |
RoyDaleOne (talk|edits) said: | 21 October 2008 |
| From first hand experience, it is standard practice in Saudi to pay "grease" to various governmental officials. Otherwise, your vegetables rot in quarantine inspection. | |
PHIL MOODY (talk|edits) said: | 22 October 2008 |
| Her quote says "she makes payments..........." The question never says the payments were made by her employer, nor was the employer aware of such payments. The way I read this is she took it upon herself, as a sales rep, to pay this grease out of her own commissions. So her employer was not entitled to any deduction, made by others. Perhaps the question should be, was Susan entitled to any deduction. | |
Crystalraz (talk|edits) said: | 23 October 2008 |
| What's a Hottentot? | |
RoyDaleOne (talk|edits) said: | 23 October 2008 |
| http://social.chass.ncsu.edu/wyrick/DEBCLASS/hotten.htm | |
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