Winston v. Commissioner
| Decision Date | 08 May 1984 |
| Docket Number | Docket No. 6374-81. |
| Citation | 1984 TC Memo 248,48 TCM (CCH) 55 |
| Parties | Frank M. Winston and Jacinta D. Winston v. Commissioner. |
| Court | U.S. Tax Court |
Frank M. Winston, pro se. Pamela Piland, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined a deficiency in the amount of $839 in petitioners' 1977 Federal income tax and an addition to the tax under section 6653(a)1 in the amount of $42. The issues for decision are:
(1) Whether petitioners are entitled to a charitable contribution deduction under section 170(a)(1) in the amount of $5,764 based solely on their forgiveness, to that extent, of a portion of a purported debt owed to petitioner Frank M. Winston by his church; and
(2) Whether, if we find that petitioners underpaid their taxes for 1977, any part of the underpayment was due to negligence or intentional disregard of rules and regulations within the meaning of section 6653(a).
At the time they filed their petition in this case, petitioners, Frank M. Winston and Jacinta D. Winston, were husband and wife, and they resided in Los Angeles, California. They timely filed a joint Federal income tax return for 1977, reporting their income on the cash basis. Hereafter we shall refer only to Frank M. Winston as petitioner.
Approximately 20 years ago, petitioner, who was a practicing real estate broker at the time, joined with a small group of business and professional people in the Beverly Hills, California, area in forming an informal real estate investment club. After some years, the club evolved into a philosophical and social group; the members felt they shared consonant views on life, philosophy, and religion.
Eventually, the members of the club decided to get involved in a church movement. In 1969, they formed a church, the Temple of the Inspired Living (T.O.I.L.), described as a "worldwide, not for profit, all faiths, spiritual/metaphysical, educational church." They obtained a charter from the State of California to operate the church as a corporation sole.2
Petitioner was named Prime Minister of T.O.I.L., a position described by petitioner as equivalent to that of a corporation's executive officer. Church Bishops functioned in an advisory capacity with respect to T.O.I.L.'s activities; as Prime Minister of the Corporation sole, however, petitioner had the power to overrule the Bishops.
Petitioner has held the position of Prime Minister at all times from 1969 to the date of trial. Since 1969, and continuing to the date of trial, the address and primary place of T.O.I.L.'s worship and business has been 1048 Stearns Drive, Los Angeles, California 90035, the same address as petitioner's personal residence.
Throughout its existence, T.O.I.L. never charged dues or assessments to its members; the church operated solely through goodwill offerings from members and friends. T.O.I.L. never had any money, except for a period of approximately 1 year from 1976 to 1977, when T.O.I.L. maintained a bank account at the Crocker National Bank. At one point during 1977, this account had a balance of $4,313, the highest balance ever maintained. The account was funded through contributions made by the church membership for the purpose of financing a bingo operation as a church fund-raising activity.
The money in the account was used in T.O.I.L.'s effort to procure a lease of certain premises located in Anaheim, California, which were intended to house the planned bingo operation. T.O.I.L. entered into the lease with an option to purchase the property after 6 months; however, the City of Anaheim denied T.O.I.L.'s application for occupancy of the premises. Thus, T.O.I.L. never exercised the option to purchase the premises; its bingo operation never materialized; and no funds were ever raised from the venture. All of the money in T.O.I.L.'s Crocker bank account was used in furtherance of the failed bingo venture; after its failure, the account was closed.
On December 19, 1976, at a meeting of T.O.I.L.'s Board of Directors, a motion was made and carried by the quorum present to "recommend to the Prime Minister for adoption" the following:
That the Prime Minister is authorized to receive a Clergyman's House Allowance for Calendar Year 1977 for all expenditures allowable by law to a maximum amount of $18,500.00, but not to exceed actual amounts expended.
The motion was qualified by the following language:
In the event the Church shall not have sufficient funds with which to pay said authorized allowance, any balance owed shall be cumulative and bear interest at a rate of six percent (6%) annually on the unpaid balance.
The motion was presented for adoption to petitioner as Prime Minister of T.O.I.L. Petitioner adopted the motion by subscribing his name to the written motion on December 19, 1976.
The Clergyman's house allowance was recommended as a means of compensating petitioner for services rendered by him to the Church as its Prime Minister, and was "in addition to" and "a part" of petitioner's authorized T.O.I.L. salary of $54,000 for 1977. T.O.I.L. had also authorized salaries and housing allowances in favor of petitioner in years prior to 1977.
Several other T.O.I.L. officers were authorized to receive salaries similar to petitioner's; however, petitioner, as T.O.I.L.'s Prime Minister, was the only church member authorized to receive a clergyman's house allowance.
During 1977, petitioner incurred and paid, using his own funds, household expenses totalling $13,257 which included the following:
Mortgage Payments ............................... $ 4,642
Property Taxes .................................. 1,566
Home Improvement Loan Payment ................... 1,000
Water, Gas, Electric ............................ 327
Gardener ........................................ 240
Pool Maintenance & Repair ....................... 135
Depreciation Value, Furniture & Furnishings ..... 2,500
Insurance Coverage .............................. 400
Housekeeping Costs .............................. 1,200
House Repairs ................................... 1,247
_______
Total ......................................... $13,257
On his 1977 federal income tax return, petitioner claimed Schedule A deductions for property taxes in the amount of $1,566 and home mortgage interest expense in the amount of $4,283. During 1977, T.O.I.L. paid petitioner no portion of his authorized T.O.I.L. salary; nor did T.O.I.L. pay petitioner any portion of his authorized clergyman's house allowance in reimbursement of the household expenses which he had paid. Similarly, none of the other church officers authorized by T.O.I.L. to receive salaries received any portion of their salaries.
A document entitled "ANNUAL ACCOUNT STATED AMOUNTS OWED BY TOIL TO FRANK WINSTON FOR CALENDAR YEAR ENDING DECEMBER 31, 1977," reflects that T.O.I.L. owed petitioner the following amounts:
Authorized But Uncollected Salaries
From Prior Years ......................... $ 62,400
Salary For Current Year ................... 54,000
Authorized But Uncollected Clergyman
House Allowance For Prior Yearse ......... 52,341
Interest at 6% For Prior Year Uncollected
House Allowances ......................... 3,140
House Allowance for Current Year .......... 13,257
________
TOTAL: .................................. $185,138
This document also contained the following note:
As of the date of trial, T.O.I.L. had not paid petitioner any portion of the accumulated amounts for his salary or clergyman's house allowance.
On his 1977 Federal income tax return, petitioner claimed a charitable contribution deduction in the amount of $5,764 which is based on the amount of T.O.I.L.'s purported indebtedness forgiven by petitioner as indicated in the document referred to above. In arriving at the precise amount of the charitable contribution, petitioner, after consulting his accountant, took into consideration the amount he would need as a deduction to offset his 1977 taxable income, thereby reducing his 1977 tax liability to zero and allowing him to receive a full refund of taxes withheld during the course of the year.
OpinionSection 170(a)(1), provides, as a general rule, that there shall be allowed as a deduction "any charitable contribution * * * payment of which is made within the taxable year." A charitable contribution is defined in section 170(c) as "a contribution or gift to or for the use of" the organizations described therein. Petitioner contends that when he forgave a portion of a purported debt owed to him by T.O.I.L., his church, for an authorized but unpaid clergyman's house allowance, he made a deductible charitable contribution to T.O.I.L. in the amount forgiven. We do not agree. We sustain respondent's disallowance of the deduction.
Section 1.170A-1(a)(1), Income Tax Regs., requires that the contribution must be "actually paid during the taxable year." To show that "payment" of the claimed contribution was made during the taxable year, the taxpayer must establish that he parted with dominion and control over the alleged gift. Glynn v. Commissioner Dec. 37,625, 76 T.C. 116, 121-122 (1981), affd. without published opinion 676 F. 2d 682 (1st Cir. 1982). In Guren v. Commissioner Dec. 33,773, 66 T.C. 118, 121 (1976), the Court stated that "the term `p...
To continue reading
Request your trial