• Can a parent deduct payments made to support a volunteer missionary son? That was the question before a federal appeals court in a recent case. Here are the facts. The parents of two Mormon missionaries transferred several thousand dollars to the missionaries’ personal checking accounts, and then attempted to deduct the transfers as charitable contributions. The missionaries used the funds for travel and living expenses. The Internal Revenue Code permits taxpayers (who itemize deductions) to claim a deduction for (1) contributions of cash or property made directly “to or for the use of” a tax-exempt organization, or (2) unreimbursed expenditures incurred while performing services on behalf of a tax-exempt organization. The parents argued that their transfers of money to their missionary-sons’ personal checking accounts constituted a deductible contribution under either of these two theories. The federal appeals court rejected the parents’ claims, and denied a deduction under both theories. In rejecting the contention that the parents’ transfers constituted deductible charitable contributions of cash or property, the court applied a “control” test: “In situations where a taxpayer has claimed a charitable contribution for funds that have been earmarked for a specific individual, courts have applied an objective ‘control’ test that considers whether the charity or the recipient exercises control over the use of the funds …. The better reasoned approach, we feel, is to require that the recipient charity have full control over the donated funds. This will show a manifested intent to benefit the charity and preserve the indefiniteness of the ultimate beneficiary of the gift—an essential element of a charitable contribution. Here the charity lacked actual control over the funds. Contributions were deposited directly into the personal checking accounts of the taxpayers’ sons. While the Church admonished the missionaries to spend their money wisely, the particular use to which the funds were put was solely within the control of the missionaries. Any surplus received by the missionaries was theirs to keep, and other than requiring the missionaries to submit weekly reports of their expenses, the Church had no discretion over the disposition of the funds.” The court also denied the parents a deduction for the unreimbursed travel and living expenses incurred by their sons in the course of performing their volunteer missionary services. The court emphasized that only the person who incurs unreimbursed expenses in the course of charitable services is eligible to deduct them, and accordingly that the parents could not claim a deduction for their children’s unreimbursed expenses. It observed that “it is a fundamental principle of tax law that assignments of deductions are prohibited.” Finally, the court noted that travel expenses (including meals and lodging) incurred while performing charitable services are deductible only if incurred while away from home. The court observed that whether a missionary is “away from home” depends on the following rules: (1) if the missionary assignment is less than one year, all the facts and circumstances must be considered in reaching a conclusion; (2) if the assignment is more than one year but less than two years in length, then there is a presumption that the missionary is not away from home (and accordingly cannot deduct travel expenses); and (3) if the assignment is two years or longer, then the missionary is not considered to be away from home regardless of the facts and circumstances (i.e., his or her home has become the place of missionary service, and thus no travel expenses are deductible). While the court was not required to decide the issue, it suggested that missionaries who serve two year terms (or longer) are not eligible for any deduction of their unreimbursed travel expenses incurred during the course of their charitable services. The court rejected a more liberal ruling of another federal appeals court, in which parents of a Mormon missionary were allowed a deduction for payments they made to support their missionary son. White v. United States, 725 F.2d 1269 (10th Cir. 1984). The White decision is relevant only in the tenth federal circuit (which includes the states of Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming). The present ruling is applicable in the ninth federal circuit (which includes the states of Alaska, Arizona, California, Hawaii, Idaho, Montana, Oregon, Nevada, and Washington). Parents in these states who wish to support the missionary activities of their children are free to do so, but to ensure the deductibility of their support they will need to direct their support to a missions agency rather than directly to their children. Davis v. United States, 88-2 USTC para. 9490 (9th Cir. 1988).

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