In Uncategorized on 10/24/2016 at 18:05

But It’s Taxable

I’m borrowing the title of John Lennon’s 1967 message to the world to tell the story of Joseph L. Jackson and Sylvia A. Jackson, 2016 T. C. Sum. Op. 69, filed 10/24/16.

In the year at issue, Joseph L. “…was the pastor, a director, and the registered agent for Triumph Church of God (church).  Mrs. Jackson was also a church director.  The church had approximately 25 to 30 active members and as many as seven ministers and offered services three days each week.  Mr. Jackson had informed the church’s board of directors that he did not want to be paid a salary for his pastoral services but that he would not be opposed to receiving ‘love offerings’, gifts, or loans from the church.” 2016 T. C. Sum. Op. 69, at pp.2-3 (footnote omitted, but it might explain things, so see infra, as my high-priced colleagues say).

“For a discussion of the meaning of the term ‘love offering’, see Michael P. Mosher & Ryan K. Oberly, ’A Gift Not So Simple–Current Tax Issues Associated With ‘Love Offerings’, 24 Tax’n of Exempts 28 (July/Aug. 2012).  For present purposes, we understand that petitioners consider the term to be synonymous with ‘nontaxable gift’.” 2016 T. C. Sum. Op. 69, at p. 3, footnote 3.

Well, the loans were undocumented, so those go by the cliché.

And the “love offerings” might just be payment in lieu of compensation; but not salary or wages, since IRS doesn’t claim Joseph L. was an employee of the church or anyone else.

“In Commissioner v. Duberstein, 363 U.S. at 284-285, the Supreme Court stated that the problem of distinguishing gifts from taxable income ‘does not lend itself to any more definitive statement that would produce a talisman for the solution of concrete cases.’  The Supreme Court concluded that, in cases such as this one, the transferor’s intention is the most critical consideration, and there must be an objective inquiry into the transferor’s intent.  Id. at 285-286.  In other words, rather than relying on a taxpayer’s subjective characterization of the transfers, a court must focus on the objective facts and circumstances.  Id. at 286.” 2016 T. C. Sum. Op. 69,

None of the 25 or 30 active members come forward, and Joseph L. and Sylvia both testify that he told his board of directors that he would accept “love offerings” in lieu of pay.

Joseph L. is out of luck.

“Petitioners did not offer the testimony of any members of the congregation (including the other directors) or Ms. Simmons that would allow the Court to conclude that the transfers were anything other than compensation for services.  The frequency of the transfers and the fact that they purport to have been made on behalf of the entire congregation is further objective evidence that the transfers represented a form of compensation.  See Goodwin v. United States, 67 F.3d 149, 152-153 (8th Cir. 1995) (holding that substantial, ongoing cash payments collected from church congregation and transferred to pastor as ‘special occasion gifts’ constitute taxable income).” 2016 T. C. Sum. Op. 69, at p. 7.

So STJ Daniel A. (“Yuda”) Guy gives IRS the win and a Rule 155 beancount.

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