670 F.2d 104 (9th Cir. 1981), 80-7358, Bubbling Well Church of Universal Love v. C.I.R.

Docket Nº:80-7358.
Citation:670 F.2d 104
Party Name:BUBBLING WELL CHURCH OF UNIVERSAL LOVE, INC., Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
Case Date:November 27, 1981
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 104

670 F.2d 104 (9th Cir. 1981)

BUBBLING WELL CHURCH OF UNIVERSAL LOVE, INC., Petitioner-Appellant,

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.

No. 80-7358.

United States Court of Appeals, Ninth Circuit

November 27, 1981

Argued and Submitted Nov. 12, 1981.

Page 105

Peter R. Stromer, San Jose, Cal., for petitioner-appellant.

Ernest J. Brown, Washington, D. C., argued, for respondent-appellee; Michael L. Paup, Chief App. Sec., John F. Murray, Acting Asst. Atty. Gen., Robert A. Berstein, Richard N. Bush, Washington, D. C., on brief.

Appeal from the United States Tax Court.

Before SKOPIL and BOOCHEVER, Circuit Judges, and BILBY, [*] District Judge.

BOOCHEVER, Circuit Judge.

Bubbling Well Church of Universal Love (the Church) appeals the Tax Court's denial, 74 T.C. 531, of its application for tax exempt status under I.R.C. § 501(c)(3). Because the Church failed to show that no part of its net income inured to the benefit of private individuals, we affirm.

The Harberts' family are the sole employees and sole voting directors of the Church. In 1977, the $61,543 1977 Church budget included a $13,648 parsonage allowance, a $19,468 minister's living allowance, and $3,924 in other expenses paid to or for the Harberts. These payments were authorized by the three Harberts acting as the Board of Directors. The record showed few employee services received by the Church in exchange for the payments. The Church held Christmas and Easter services, and John Harberts made an unspecified number of ministerial visits, and performed one marriage and several burials. There was a statement that all three Harberts devoted 100% of their time to church activities, although Catherine and Dan Harberts' duties were not specified. The Church refused to itemize expenses of $17,000 for maintenance and supplies. Travel expenses of $2,529.26 were included covering a trip to Europe by the pastor "on church business, proselytizing new church members," however, no facts were detailed to explain the relationship between the taxpayer and the trip to Europe.

A precondition to I.R.C. § 501(c)(3) tax exempt status is that no part of an organization's net earnings inure to the benefit of a private person. Salaries may be paid, but unreasonable salaries constitute inurement of benefit. Birmingham Business College v. Commissioner, 276 F.2d 476, 480 (5th Cir...

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