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Clergy—Income Taxes

The United States Tax Court ruled that the IRS can ignore a pastor's "tithes" as a "living expense" in evaluating an offer in compromise.

Federal
State:
Key point. An offer in compromise is an offer a taxpayer submits to the IRS to settle a tax liability for less than the amount of the liability. The IRS can accept such offers in whole or in part under limited circumstances.

Pixley v. Commissioner, 123 T.C. 15 (2004).

The United States Tax Court ruled that the IRS can ignore a pastor's "tithes" as a "living expense" in evaluating an offer in compromise.

An ordained pastor (Brad) served as the pastor of a local church from 1995 through 2001. He then moved to another state and was employed as a medical technician in a hospital. The IRS sent Brad a letter notifying him that it was going to seize his assets in an attempt to satisfy unpaid tax liabilities of $60,000. Seeking to avoid IRS collection efforts, Brad submitted an "offer in compromise" to the IRS (on Form 656) in which he sought to have his tax liabilities ...

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Posted:
  • November 1, 2004

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