MinistryCPA - Corey A. Pfaffe, CPA, LLC

Question: A church youth group is going on a missions trip this summer. There a few youth members who have yet to bring in the necessary amount needed for their trip. A couple in the church has offered to give towards their trip in exchange for work around their house. How is this treated? Is this allowable? Answer: Our MinistryCPA experience leads us to believe that in most cases the value of the work that is being completed by the youth members is not representative of the donation amount. It often appears to us that the young people are essentially volunteering so that a homeowner will consider making a donation, rather than providing taxable, fair value services. This kind of work is sometimes referred to as a "makework proposition" (e.g. raking leaves, washing windows, trimming hedges).

Question: A church regularly sends out teams on short-term mission trips to destinations hosted by charitable organizations. They have set up a fund for receiving special offerings and for reimbursing travel, meals, and lodging expenses. Recently, a church team was required to pay the hosting organization a fee for each member to cover meals and lodging. The team leader required each team member to make a donation to the fund in the amount of the fee. Are these donations tax deductible? Some argue that the team members are receiving a benefit from the donation and should not receive a tax benefit for the donations. Others feel they should qualify for a charitable donation because the benefit they receive only facilitates their charitable work. Besides, can't these expenses be deducted on the individual's Schedule A as out-of-pocket contributions even if the church doesn't consider them a donation? Answer: IRS Publication 526 says, "Generally, you can claim a c...