I have this client that owns a drycleaning business. Why they call it drycleaning when water and steam is used is beyond me. But that's besides the point.
Anyway, client hires a lot of summer youths to work at his business. Some of these kids have worked 5 or 6 summers in a row (high school summers + college summers).
Client hired a Drycleaning Business Consultant ("DBC's," they are called) who recommended that client cut the normal wage for these summer workers, across the board. The client went ahead and did this. At the same time, and at the DBC's recommendation, client instituted a tax-free scholarship program for these kids. Some, but not all, of these kids will receive tax-free scholarships for college. The first ones were awarded and paid in 2013. This program has reduced client's FICA burden considerably as the client operates 46 drycleaning stores in the greater metropolitan area.
I'm not sure how to classify these scholarship payments on the client's 1120S. I was thinking "Employee Fringe Benefits," but then I got to wondering about the ordinary/necessary aspect of this scholarship program...I have called the DBC, but he has not returned my call as of yet.
Please provide thoughts, advice and assistance.