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Deductions and Benefits Received

Donors cannot deduct contributions if they receive benefits in exchange.

The Tax Court ruled that a woman who made contributions to a religious organization was not entitled to a charitable contribution deduction since the organization provided her with the necessities of life. The taxpayer lives and works at a Christian parachurch ministry devoted to the rehabilitation of drug addicts and alcoholics. Her duties included working as school principal and teacher, leader of religious services, rehabilitation counselor, administrator, clerical worker, cook, and member of ministry's board. She is not an ordained minister. She also is employed in a secular job, and donated all of her secular earnings to the ministry. Members of the ministry live under a covenant whereby they hold no private property and own all material possessions in common. It is as a result of this covenant that the taxpayer turned over her salary to the ministry. The taxpayer lived frugally at the ministry, but did receive benefits as a resident member of the community. The community provided lodging, food, clothing, and transportation to the taxpayer and her children at no cost. Under these facts, the Tax Court concluded that the taxpayer was not entitled to any charitable contribution deduction. It observed:

In recent years, this Court has held that contributions made to communal organizations which offer secular benefits to their members are not exclusively for exempt purposes and hence not tax deductible … It is clear that [the ministry] performs important social and spiritual functions and that its leaders give selflessly of themselves to the extent of their ability. [The taxpayer] has given far more than she has received, having committed all her possessions, her earnings, and her time to the [ministry]. She and her children did receive provision, however meager, for their necessities from [the ministry]. It would be impossible under the circumstances to place a monetary value on the benefits received, nor have we been asked to do so, as [the IRS] is not seeking to tax them as compensation. Receipt of such benefits, however, constitutes private inurement, and under these circumstances it is impossible to value the amount of the charitable contribution unless the value of the benefits received can be determined.

The Court also rejected the taxpayer's claim that she was a "minister of the gospel" and thereby eligible for a parsonage allowance. Ohnmeiss v. Commissioner, T.C. Memo. 1991-594.

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Posted:
  • September 1, 1992

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