Note on Taxing of Nonprofits

In a case recently upheld by the Fifth Circuit, the Tax Court found that amounts deposited into a “pastoral account” were not deductible as charitable contributions.  The Court focused on the pastors’ (a husband and wife) control over the funds in the account, noting that personal expenses were paid out of the account, and social security payments for the husband were directly deposited into the account.  The case (Gunkle v. Commissioner) involved the use of a “corporation sole” in what appeared to be an attempt to avoid certain taxes.  However, in the end, the taxpayers were assessed tax on the personal expenses paid out of the account, along with a 20% accuracy related penalty.  

This blog is for informational purposes only and should not be relied upon as legal advice.


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