Mission Support for Building Project: Taxable to Missionary?

Question:

A church collected donations for a missionary it supports for the purpose of constructing a special building project. How should these amounts be reported? They would not be considered income to the missionary, correct?

Answer:

First, the church may wish to contribute the funds to the missionary's mission agency. Mission agencies have personnel with the knowledge to properly classify disbursements such as the one cited here as to whether they are taxable. This experience is rarely available to a local congregation.

For example, were the missionary to purchase the land for a building project and title it in his own name, no business expense would be created since the missionary never relinquished ownership of the property. A mission agency would not classify this disbursement as a non-taxable reimbursement.

If no mission agency is involved, the church is probably best advised to issue Form 1099-MISC for the full amount of support. If the missionary is able to document the construction costs as a business expense, he can do so on his personal income tax return.

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MinistryCPA - Corey A. Pfaffe, CPA, LLC

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