Discussion:Clergy-gift of land-taxable on W-2
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Mark Eason (talk|edits) said: | 10 July 2006 |
| A minister just moved to a Baptist church. A leader in the church, but who is not on the governing body, offered to gift to the minister (not the church) a $30,000 lot for the minister to build his house on. I know that Christmas bonuses and annual poundings are included on the ministers W-2, but what about an individual gift directly to the minister of this size. One of my concerns is to an IRS auditor that this is additional compensation that the church could not afford in the minister's pay package because the minister has just been hired. (I have suggested alternatives, but some of them still include gifting by this individual to the minister.) | |
| July 10, 2006 | |
| Definitely troublesome on multiple levels. One, the 'donor' isn't getting a deduction for this, tho' that may not matter to him. Two, the pastor's may have income unless this can be construed as a gift, assuming that the donor is an individual, and that the pastor is married...maybe you can make it. Three, you may be jeopardizing the church's tax exempt status. I'd read up on prohibited transactions and make sure that this isn't one of them. Even tho' that member isn't a part of the board, if he's one of the top givers, IRS considers him to be disqualified. Research research research. | |
Mark Eason (talk|edits) said: | 12 July 2006 |
| Thanks JR1. Pub 1828 was a good start for researching inurement and private benefit(Tax Guide for Churches and Religious Oganizations). I have sent to the minister my various research findings. Looks like the landowner will be doing a "deed of gift" to the minister, not the church (advice from landowner CPA). The taxation of a gift of an individual church member to a minister appears to hinge on "past and/or expected future services". RIA only showed taxable gifts. Some clergy tax sites state that all gifts of this type are not income to the minister and are not deductible by the member. They did not site their source.
Has anyone had a situation where a church member gave their minister a gift and how was it handled? | |
| 12 July 2006 | |
| I'm not sure if these will help your exact question or not, but have you seen the multiple articles on Ministers / Clergy listed on the General Information page? You can get to this page by selecting the General tab from the Main Page.
Items listed in that section: Please feel free to edit or add to any of these pages. TaxAlmanac is designed to be a collaboration effort to capture the combined knowledge of the community for the benefit of the community, not just a discussion forum.
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Mark Eason (talk|edits) said: | 12 July 2006 |
| Thanks Tim. The info there is good, but the info I am looking for is not there.
The issue is when is a gift earnings to the minister. If the church makes a gift to the minister, it is included on the W-2. With this situation, an individual member is making a gift to the minister. If the $30,000 is taxable, the minister has to come up with cash to pay the taxes(probably $10,500 or more), and then the increase in his wages (more than double his Box 1 income and 50% increase over his package) could be deemed excessive when compared to other churches of this size, which could kick in the inurement rules, which could jeopardize the church's tax-exempt status. If anyone has had a similar situation with a minister, individual members giving gifts to the minister, please let me know. Thanks for the help. | |
| 12 July 2006 | |
Well, my background isn't in taxation, so I can't provide an answer, but I do know this website pretty well. I did a search on the 'User' pages and found four TaxAlmanac users who have either "minister" or "clergy" listed on their personal pages (you've all filled out your personal user pages, right?). If you don't get an answer in this discussion, you might think about leaving a message on these users' talk pages or emailing them to see if they can help out.
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| July 12, 2006 | |
| No worries on that, Mark. The pastor isn't providing services to the giver. It's merely a gift, and that's legit. Now a gift tax return might be in order...and again, you've got to leap the 30k amount with either the pastor being married, or the giver, or both, and things being jointly held...but there's no income to the pastor, and no deduction to the giver. | |
TaxAssistCPA (talk|edits) said: | 12 July 2006 |
| It would be cleaner to have donor make a gift of the land to the church and then he could get the deduction and the pastor would not have income. It would enter into the calculation of his housing allowance in the same way as when the church owns a rectory or parsonage.
However, if the object is not to have a deduction for the donor, the direct gifting would work, especially if the donor and the pastor are both married and it was a joint gift, then no gift tax. | |
| July 12, 2006 | |
| That's exactly what I was alluding to, as well, TA, without filling in all the dots for him the first time. But Mark, this is the best way. The church can own the land, or include it as housing in one year, tho' you have to watch the reasonable amounts for that area.... | |
Mark Eason (talk|edits) said: | 12 July 2006 |
| Thanks JR1 and TaxAssistCPA for your help | |
TomReinhart (talk|edits) said: | 30 January 2007 |
| I have a minister who is going to receive $40,000 from his church-employer in recognition of his 13 years of service to the church. The church does not offer any sort of retirement plan, and the church board wants to give the $40,000 in lieu of a qualified retirement plan. Can the church report this payment to the minister as something other than W-2 income? What about FICA taxes? Thanks, TER, CPA | |
| 31 January 2007 | |
| Besides a salary, ministers wages may include several other items of which retirement gift paid by the church and severance pay and ect..... | |
