Church as a Conduit for Non-deductible Gifts: Illustration

Question:

A member of a church has recognized the need of a family in the congregation for a new vehicle. If the member purchases a car and gives it to the church, which immediately passes it along to the needy family, can the donor claim a tax deduction?

Answer:

Car purchases and gifts of this type are common topics on the MinistryCPA blog, so readers should first consider the following blog posts.

Donating a Vehicle

Church as a Conduit for Non-deductible Gifts

Deductibility of Designated Gifts

Since it is apparent that the car is a gift from one individual to another individual, using the church as a conduit, it is highly unlikely that a charitable deduction is warranted. As readers may have observed by reading the above blog posts, congregational initiation is necessary to avoid the appearance or reality of a gift between individuals. In order for a gift to be deductible, it must be a charitable act of the church body rather than the good intentions of an individual.

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Rental of a Church Parsonage to a Non-Minister

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Question: A church provides its minister a housing allowance but believes it must report the full amount of compensation (including the non-taxable housing allowance portion) on Form 1099-MISC in order to demonstrate the full earnings of the minister. (Starting in 2020, Form 1099-MISC is replaced with Form 1099-NEC for non-employee compensation.) If the church reports his compensation, including the housing allowance, on the Form 1099-NEC as taxable income, will he be able to deduct his housing expenses somewhere else on the Form 1040? Answer: This question brings up a couple of issues. First, most ministers are properly classified as employees who receive Form W-2 , not as independent contractors who receive Form 1099-NEC . Box 1 on Form W-2 reports taxable compensation. It is reduced to reflect the church's designation of a portion of his pay as non-taxable housing. Then, in Box 14 (Other), Form W-2 typically reports as a memorandum item his additional non-taxable, housing allowa

MinistryCPA - Corey A. Pfaffe, CPA, LLC

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