[TheCPA]

To be deductible as a business expense, the payment must be ordnary, necessary, and reasonable (Section 162(a)). The ordinary criterion basically means that the expense must not be capital in nature. Because the expense relates to the future, it might not be an ordinary expense. Some capital expenditures are subject to depreciation or amortization. Other capital expenditures are not deductible until the owner sells the business. There may be some case law about whether such an expense meets these criteria.

Even if it is not a deductible expense, it is likely taxable to her. Gross income includes all income unless the nature of the income is specifically excluded from gross income (Section 61(a)). As to lawsuit settlements, only payments for physical injuries or sicknesses are excluded from gross income (Section 104).

Possibly, the payment is a gift. In that case, Tiger would have to file a gift tax return and pay gift tax. A gift is a transfer without adequate consideration in money or money’s worth. I do not think it is a gift because he is paying her for her silence, which is something he perceived to have monetary value.

[ken5050]

Many thanks..FR is indeed an amazing place....15 minutes after I post a question..asking for a CPAS's opinion..here you are!!! RE the gift tax issue..gift tax laws only apply from one individual to another, right? If the payment was made from one of his corporattions, and was NOT deducted as a business expense..would it still be income to her? I thought the basic concept was..if one entity deducts it, the other has to report it...like the difference between alimony and child support? IF he indeed pay a gift tax..that about another $5 mill right? As long as I have you..one more questiuon, if I may..when the story first broke, I recall reading something about Tiger's foundation..that it had only donated a very small amount to children despite having raised millions. Aren't charitable entities returns publicly available?

Again, thanks..