Davis v. United States - 495 U.S. 472, 110 S. Ct. 2014 (1990)

Rule:

Under the Internal Revenue Code of 1954 § 170, 26 U.S.C.S. § 170, a taxpayer may claim a deduction for a charitable contribution only if the contribution is made to or for the use of a qualified organization.

Facts:

Petitioner husband and wife, who were members of the Church of Jesus Christ of Latter-day Saints (Church) claimed such deductions for funds transferred to their sons while they were serving as full-time, unpaid missionaries for the Church. The Church requested the payments, set their amounts, and, through written guidelines, instructed that they be used exclusively for missionary work. In accordance with the guidelines, petitioners' sons used the money primarily to pay for rent, food, transportation, and personal needs while on their missions. In their joint tax returns filed in 1980 and 1981, petitioners claimed their sons as dependents, but did not claim a charitable contribution deduction under 26 U.S.C. § 170 for the funds sent their sons during their missionary service. Subsequently, petitioners filed an amended income tax return for the years 1980 and 1981, claiming additional charitable contributions of the $ 3,480.89 and $ 4,882 paid to their sons during the missionary service. The IRS disallowed the refunds. Petitioners filed a refund suit, which the district court rejected. According to the district court, petitioners’ payments to their sons were not "for the use of" the Church because the Church lacked sufficient possession and control of the funds. The appellate court affirmed. 

Issue:

Could the payments made to support the sons’ missionary services be considered as charitable contributions under 26 U.S.C.S. § 170, or as unreimbursed expenditures made incident to the rendition of services to a charitable organization under Treas. Reg. § 1.170A-1(g) (1989)? 

Answer:

No.

Conclusion:

The Court affirmed the decision of the lower courts, holding that the payments made to support the sons’ missionary services were not charitable contributions for the use of petitioners' church within the meaning of 26 U.S.C.S. § 170. The legislative history, the generally understood meaning of the language used, and the contemporaneous and longstanding construction prompted the court to accept the government's interpretation of the statute that petitioners' contribution was for the use of the church only if the funds were held in a legally enforceable trust or a similar legal arrangement for the church. Petitioners deposited the funds directly into their sons' personal bank accounts. Although the sons promised to spend the money only on church-related expenses, they had no legal obligation to do so. Petitioners did not donate the funds in trust for the church. Further, petitioners were unable to claim a deduction for the funds as unreimbursed expenditures incident to a contribution of charitable services under Treas. Reg. § 1.10A-1(g) (1989) since the expenditures were not incurred in connection with petitioners' own rendition of services.