MinistryCPA - Corey A. Pfaffe, CPA, LLC

Question: A church is in the process of purchasing property and wants to use the modified cash basis. The church plans to pay for part of the property with cash while financing the remainder of the payments through a long-term note. What are the debit and credit effects of the following hypothetical scenario? Hypothetical Scenario: The property that the church desires to purchase costs $100,000. The church is able to pay $50,000 with cash, meaning that the remaining $50,000 will be financed through a long-term note. The church expects to pay monthly payments of $500 on the long-term note.  Answer: The modified cash basis, as we recommend its application, includes no long-term assets or liabilities on the balance sheet. Therefore, the journal entries for the above scenario are as follows: * Capital Expenditures (debit)                        ...

Question: A member of our congregation owns a timeshare at a resort. He would like to donate a two week stay at the timeshare to our pastor. This situation leads me to ask the following questions:  1)     The donor is requesting a deductible contribution letter. Is it appropriate for us to give him one? 2)     Is this situation taxable to our pastor? Answer: 1)     There is little difference between this situation and donating one’s services. Remember, there is no deduction for donating one’s services . Similar to donating one’s services, the tax benefit of what this donor is contemplating is limited to the following: He does not have to report income that he does not receive since he will collect no rent from the pastor. However, we believe it is appropriate to provide a letter thanking the member for making his timeshare available. The letter should not be prepared on church letterhead; instead, it should be prepared ...

Question: Am I supposed to include my minister’s housing allowance when determining household income for the Health Insurance Premium Tax Credit? Answer: Per final regulations issued by the IRS and Department of the Treasury on May 18, 2012, household income is calculated as follows. [i] Taxpayer’s adjusted gross income (AGI) +All Dependents’ AGI (if required to file a tax return) +Foreign earned income excluded from AGI +Tax-exempt interest +Social Security Benefits not included in gross income Modified Adjusted Gross Income The above calculation does not include an adjustment for housing allowance; therefore, the minister’s housing allowance that is excluded from federal tax is also excluded from household income for purposes of the Health Insurance Premium Tax Credit. [i] 77FR 30377-30400 (May 23, 2012)