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Donor Input on Disbursement of Funds

Question:

A donor contribution to a church established a fund to be advanced to missionaries in case of urgent needs. Subsequently, the donor asked that the church treasurer forward some funds to a missionary for his use. When the church treasurer distributes the funds, should they to be treated as a gift or taxable income? The treasurer understands that if he sends the funds through the missionary's agency that handles his account it will be treated as taxable income.

Answer:

It is certainly taxable income to them, so I recommend sending it through the mission agency so that the treasurer won't need to issue Form 1099-MISC; the agency will report it consistently with the missionary's other earnings.

Also, just a note. Since the ability to direct funds after they are donated ends once the gift is received and a designation is made (i.e., “for the purpose of establishing a fund to be used by selected missionaries in case of urgent needs”), I recommend that the church decision to send the funds be documented--if, and only if, it concurs with the donor’s suggestion of the particular missionary. Otherwise, the donor jeopardizes the deductible nature of his or her donation and the church may be inadvertently setting a bad precedent.

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