A church recently held an ordination service for one of its members, who is planning to go on a foreign missions trip. During the service, a $1,000 special offering was taken. Is this offering taxable for the missionary? Is it deductible by the donors?
Yes, the offering is taxable as compensation. Because the missionary is "self-employed" for income tax purposes, the church should issue Form 1099-MISC, and the missionary should closely track and report business expenses to facilitate deductibility of those expenses. The gift is also deductible by the donors, because it is viewed by the IRS as a congregational gift. The key is initiation of the gift: a gift to an individual initiated and controlled by the church is deductible by the donors.
After the offering has been given to the missionary, a friend gives another gift to the church. This gift is designated for the missionary, but "to be used as the church sees fit if the trip is fully funded." Can the church simply give this money to the missionary? Is it deductible by the donor?
Because this gift is under the control of the church, it is deductible by the donor. If this gift were simply given by the donor directly to the missionary, it would not be deductible. However, because the church can use the gift as it sees fit, it is a deductible contribution. The church can pass this gift along to the missionary within the same guidelines as the original gift.