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Employee Allowances

Are allowances given to employees considered taxable income?

The Tax Court ruled that a monthly food and clothing allowance paid by a church to its minister constituted taxable income. The church paid the minister $300 each month for food and clothing expenses. The Tax Court concluded that these amounts represented taxable income, and further that they were not deductible. The Court observed that the tax law "provides a comprehensive definition of gross income" and that this term "includes income realized in any form, whether in money, property, or services." Accordingly, "income may be realized in the form of meals and clothing as well as in cash." In concluding that no part of the monthly food allowances were tax-deductible, the Court observed:

Having concluded that petitioner had gross income of $3,600 from his monthly allowance, we now consider whether he is entitled to any deductions in regards thereto. Section 162 provides that there shall ...

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  • September 1, 1992

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