Wedvik v. Comm'r of Internal Revenue, Docket No. 21304-84.

Decision Date30 December 1986
Docket NumberDocket No. 21304-84.
Citation87 T.C. No. 84,87 T.C. 1458
PartiesALBERT F. AND IDA E. WEDVIK, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
CourtU.S. Tax Court

OPINION TEXT STARTS HERE

Petitioners claimed charitable contribution deductions for payments made to various Universal Life Churches and to a fund established and maintained by the Universal Life Church, Inc., of Modesto, California. However, all such payments were repaid to petitioners or to their own Universal Life Church. HELD: Petitioners are not entitled to a charitable contribution deduction because no actual contributions were made. Sec. 170(a), I.R.C. 1954; Davis v. Commissioner, 81 T.C. 806 (1983), affd. without published opinion 767 F.2d 931 (9th Cir. 1985); Glynn v. Commissioner, 76 T.C. 116, 121-122 (1981), affd. without published opinion 676 F.2d 682 (1st Cir. 1982); Sims v. Commissioner, 72 T.C. 996, 1008-1009 (1979). HELD FURTHER: Petitioners are liable for additions to tax for fraud. Sec. 6653(b), I.R.C. 1954. Peter R. Stromer, for the petitioners.

Hugh M. Spall, for the respondent.

GOFFE, JUDGE:

The Commissioner determined deficiencies in petitioners' Federal income tax and additions to tax as follows:

+-----------------------------------------------------+
                ¦       ¦          ¦Additions to tax  ¦               ¦
                +-------+----------+------------------+---------------¦
                ¦Taxable¦          ¦                  ¦               ¦
                +-------+----------+------------------+---------------¦
                ¦year   ¦Deficiency¦Sec. 6653(b)(1)1  ¦Sec. 6653(b)(2)¦
                +-------+----------+------------------+---------------¦
                ¦1980   ¦$5,479    ¦$2,739.50         ¦0              ¦
                +-------+----------+------------------+---------------¦
                ¦1981   ¦6,691     ¦3,345.50          ¦0              ¦
                +-------+----------+------------------+---------------¦
                ¦1982   ¦6,796     ¦3,398.00          ¦50% interest   ¦
                +-------+----------+------------------+---------------¦
                ¦       ¦          ¦                  ¦due on $6,796  ¦
                +-----------------------------------------------------+
                

In his answer respondent alleged, as an alternative to the imposition of the additions to tax for fraud, that petitioners are liable for additions to tax under section 6653(a) and for damages under section 6673.

The issues presented are: (1) whether petitioners are entitled to deduct alleged charitable contributions made to several chartered congregations of the Universal Life Church, Inc., and to a fund maintained by the Universal Life Church, Inc.; (2) whether petitioners are liable for additions to tax under section 6653(b); and (3) if we find that imposing the additions to tax under section 6653(b) is inappropriate, whether petitioners are liable for additions to tax under section 6653(a) and damages under section 6673.

FINDINGS OF FACT

Some of the facts have been stipulated. The stipulation of facts and the attached exhibits are incorporated by this reference.

Albert F. and Ida E. Wedvik (petitioners) resided in Washington State during the taxable years in issue and at the time they filed their petition in this case. Petitioners filed joint Federal income tax returns for the taxable years 1980, 1981, and 1982.

Sometime prior to 1980 petitioners applied for and received Universal Life Church (ULC) charter number 32731 from the Universal Life Church, Inc., of Modesto, California (ULC, Inc.). On December 24, 1979, petitioners opened a checking account with Seattle First National Bank in the name of Universal Life Church, Inc., charter number 32731 with a deposit of $11,743.59. Petitioners and Aileen Wedvik, whose relationship to petitioners is not known, were the sole signatories of this account. Throughout the taxable years in issue, checks were drawn on this account to pay petitioners' personal expenses including mortgage payments on their home, utilities, magazine subscriptions, the cost of travel to Mexico, and payments made for the ‘Health and Welfare‘ of petitioners. Petitioners also maintained a personal checking account at Seattle First National Bank.

During the taxable year 1980 the following friends or acquaintances of petitioners held church charters from ULC, Inc.:

+-----------------------------------------+
                ¦              ¦Charter No.¦Name of spouse¦
                +--------------+-----------+--------------¦
                ¦Julius Mink   ¦30674      ¦Virginia      ¦
                +--------------+-----------+--------------¦
                ¦Edward Mink   ¦34208      ¦Sunshine      ¦
                +--------------+-----------+--------------¦
                ¦Terence Chapin¦22994      ¦Lynn          ¦
                +--------------+-----------+--------------¦
                ¦Dorothy Brooks¦39029      ¦Ronald        ¦
                +-----------------------------------------+
                

During the taxable year 1980 petitioners drew checks on their personal account payable to their church and to various other ULC churches as follows:

+-------------------------------------------------+
                ¦Charter No. ¦Charter holder¦Total value of checks¦
                +------------+--------------+---------------------¦
                ¦30674       ¦Julius Mink   ¦$10,260              ¦
                +------------+--------------+---------------------¦
                ¦22994       ¦Terence Chapin¦1,350                ¦
                +------------+--------------+---------------------¦
                ¦34208       ¦Edward Mink   ¦2,835                ¦
                +------------+--------------+---------------------¦
                ¦Unidentified¦              ¦                     ¦
                +------------+--------------+---------------------¦
                ¦charters    ¦              ¦860                  ¦
                +-------------------------------------------------+
                

During he taxable year 1981 petitioners also drew checks on their personal account payable to the ULC churches controlled by Edward Mink, Julius Mink, and Terence Chapin totaling $650, $1,000, and $400, respectively.

Although these payments were ostensibly made as charitable contributions to the respective ULC churches, a close examination of the bank records reveals that almost every, if not every, dollar paid to these other ULC churches was repaid to petitioners by way of direct or indirect payments from the other ULC charter holders to petitioners' church. In their simplest form the repayments of alleged charitable contributions made by petitioners are illustrated by the transactions that occurred on June 14, 1980. On that date petitioners purportedly donated $260 to Universal Life Church charter number 22994 by check drawn on their personal bank account. Universal Life Church charter number 22994 was issued to Terence Chapin. Lynn Chapin, wife of Terence Chapin, then signed a receipt indicating the $260 donation by petitioners. Contemporaneously, the Chapins drew a check in the amount of $260 from their personal bank account payable to Universal Life Church charter number 32731, which was controlled by petitioners.

Petitioners also engaged in many more complicated check swaps with ULC charter holders. The transactions that occurred in July 1980 are illustrative of the machinations in which petitioners engaged. On July 14, 1980, Julius Mink wrote a check payable to petitioners' ULC church in the amount of $825. On the same day Edward Mink wrote a check payable to petitioners' ULC church in the amount of $375. With checks dated July 15, 1980, petitioners made payments of $825 and $375 to the ULC churches controlled by Edward Mink and Julius Mink, respectively. Receipts for these payments were issued to petitioners. As a result of these transactions petitioners drew checks on their personal bank account in the total amount of $1,200 and deposits totaling $1,200 were made in their church bank account. Although it appears that the ULC church controlled by Edward Mink received $450 more than he paid out of his personal account, and Julius Mink $450 less, an inspection of the bank records of Julius Mink's ULC church reveals that, 3 days prior to the above check swaps, Edward Mink paid $450 to Julius Mink's ULC church. The following chart summarizes the above transaction with credits indicating payments from the individuals' personal accounts and debits indicating donations to their respective ULC churches:

+-------------------------------------------+
                ¦Date   ¦Petitioners¦Julius Mink¦Edward Mink¦
                +-------+-----------+-----------+-----------¦
                ¦7/11/80¦           ¦$450       ¦($450)     ¦
                +-------+-----------+-----------+-----------¦
                ¦7/14/80¦$825       ¦(825)      ¦           ¦
                +-------+-----------+-----------+-----------¦
                ¦7/14/80¦375        ¦           ¦(375)      ¦
                +-------+-----------+-----------+-----------¦
                ¦7/15/80¦(825)      ¦           ¦825        ¦
                +-------+-----------+-----------+-----------¦
                ¦7/15/80¦(375)      ¦375        ¦           ¦
                +-------+-----------+-----------+-----------¦
                ¦       ¦0          ¦0          ¦0          ¦
                +-------------------------------------------+
                

In early 1981 petitioners ceased exchanging checks with other ULC charter holders and began making regular payments to the Universal Life Church Receipts and Disbursements Trust Fund, a fund established and maintained by personnel connected with ULC, Inc. Beginning May 11, 1981, and continuing throughout the taxable years 1981 and 1982, petitioners regularly drew checks on their personal account payable to cash almost always in the amount of $1,000. Donation receipts were then issued and stamped with the signature of Keith L'Hommedieu, an individual associated with ULC, Inc., in the amount of $1,000. At the same time a check or checks were drawn on a checking account maintained in the name of Universal Life Church Receipts and Disbursements Trust Fund at the East Santa Cruz branch of Bank of America and made payable to petitioners, their ULC church, or both. These checks, which were also stamped with the signature of Keith L'Hommedieu, invariably totaled an amount just less than $1,000. If more than one check was written to petitioners or their ULC church on the Receipts and Disbursements Trust Fund account, such checks would be in sequential order and were written in odd dollar amounts.

The transactions occurring in early June 1981, provide an excellent...

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