Jump directly to the Content Jump directly to the content

The Deason Rule

This rule was recently reaffirmed by the U.S. Tax Court.


The United States Tax Court reaffirmed the so-called Deason rule in a recent decision.

In 1964, the Tax Court ruled that section 265 of the Code (which denies a deduction for any expense "allocable" to tax-exempt income) prevented a minister from deducting his unreimbursed transportation expenses to the extent that they were "allocable" to his tax-exempt housing allowance. Deason v. Commissioner, 41 T.C. 465 (1964).

To illustrate this principle, assume that a minister receives compensation of $30,000, of which $10,000 is an excludable housing allowance, and incurs unreimbursed business expenses of $3,000. Since one-third of the minister's compensation is "tax-exempt" ($10,000 of $30,000) he should not be permitted to deduct one-third of his business expenses since they are "allocable" to tax-exempt income and their deduction would amount to a "double ...

Join now to access this member-only content

Become a Member

Already a member? for full access.

Related Topics:
  • September 1, 1992

Related ResourcesVisit Store

20 Finance Questions Churches Ask
20 Finance Questions Churches Ask
Richard Hammar answers relevant tax and finance questions for church leaders.
12 Law & Tax Guidelines for New Ministers
12 Law & Tax Guidelines for New Ministers
Essential knowledge to ensure legal and financial clarity and integrity in ministry.
Essential Guide to Money for Church Boards
Essential Guide to Money for Church Boards
Church board members should have a basic understanding of these financial issues.
Sample Compensation Report
Sample Compensation Report
A ChurchSalary.com Sample Report for Determining Fair Compensation