Tax News

CCH (cch.taxgroup.com) reports:

  A married couple could not deduct as charitable contributions tuition and fees they paid to Orthodox Jewish day schools. The Tax Court correctly concluded that the couple failed to show that any part of the amount paid was subject to a dual payment analysis, because the couple did not have a charitable intent in paying their children's tuition and because they received a substantial benefit --education for their children --in exchange for the payments. Amendments to Code Secs. 170(f)(8) and
6115 in 1993 did not change the established rule that tuition paid to religious schools for religious education is not deductible as a charitable contribution. The exception to the charitable substantiation and disclosure requirements found in those provisions only applies where an organization is established exclusively for religious purposes.

  Moreover, the couple never intended to make a gift of the tuition payments. Instead, they paid tuition because the schools inculcated their children with their religion's lifestyle, heritage and values. They also failed to present evidence that their tuition payments exceeded the cost of a comparable secular education offered by other private schools. Therefore, the payments were a quid pro quo transaction even if part of the benefit received was religious in nature.

  Further, the Tax Court did not abuse its discretion in denying discovery regarding a closing agreement executed between the IRS and the Church of Scientology that purportedly allowed deductions for certain qualified religious services. The couple was not similarly situated to those who benefited from the Scientology closing agreement because tuition payments to schools that provide secular and religious education as part of one curriculum are quite different from payments to organizations that provide exclusively religious services. Moreover, even if similarly situated, an unlawful policy set forth in a closing agreement could not be extended to all religious organizations.

  Affirming the Tax Court, 125 TC 281, Dec. 56,225. Related case CA-9, 2002-1 USTC ¶50,210.

M. Sklar, CA-9, 2009-1 USTC ¶50,106

Other References:

 
Code Sec. 170

  CCH Reference - 2008FED ¶11,620.518

 
Code Sec. 6115

  CCH Reference - 2008FED ¶37,068.20

 
Code Sec. 6662

  CCH Reference - 2008FED ¶39,652.38

  CCH Reference - 2008FED ¶39,652.49

  Tax Research Consultant

  CCH Reference - TRC INDIV: 51,054
CCH Reference - TRC EXEMPT: 12,306