Discussion:Donation or Tuition?
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Discussion Forum Index --> Tax Questions --> Donation or Tuition?
| April 12, 2009 | |
| My client received a letter of acknowledgement from their synagogue for their contributions and the letter specifically states that no services were received for their donations. Their list of contributions includes donations for their son to attend preschool at the synagogue. The clients says the fees she pays are called "donations", however she also says her son could not attend the preschool unless she makes these donations. The donation amount is a fixed fee and not discretionary. To me, it seems that she is really paying tuition for the preschool, but yet she does have the letter from the synagogue. Has any one faced a similar situation? Donation or Tuition?
Thanks! | |
| 12 April 2009 | |
| You mean a likely unpaid volunteer with no tax experience wrote a letter on synagogue stationery that said tuition was a contribution? I'm shocked. I can't believe this goes on. Ok, enough sarcasm, here's my real answer:
The synagogue can call these things donations all they want but calling it a donation doesn't make it so. It's ultimately your client who will owe the additional tax if the IRS audits this. You should separate the real donations from the tuition and report both where appropriate. It's possible the tuition would qualify for the dependent care credit if it meets the requirements, but taking a charitable contribution for that is just plain wrong. | |
| 12 April 2009 | |
| In my other life, I was a bookkeeper in a synagogue. Dues, building fund and other donations are deductible.
Pre-school, Sunday school,Hebrew school are not deductible because you are receiving a service in return for the payment. | |
| 13 April 2009 | |
| I was just reading that the IRS does not consider preschool as educational - so maybe you can go the daycare route for those expenses. | |
Death&Taxes (talk|edits) said: | 13 April 2009 |
| The problem is ecumenical; I was doing a return for a Catholic client whose daughter was married. She said the church asked for a donation to rent the church, and that the check be marked as such. Of course it is not deductible but maybe the church is avoiding UBTI? | |
| 13 April 2009 | |
| David, in most of the churches today, the devil holds the lease, and all a man can hope to get is a sub-let.
But, I do have a bone to pick with the tax scholars. The taxpayer ought to get a deduction for the Hebrew or Latin lessons, because none of the little prophets will remember a word of it a year down the road (except the curse words); and therefore, this falls in the category of a pure charitable activity. | |
| 13 April 2009 | |
| I would suggest you have your client contact the synagogue office to get this clarified BEFORE the tax return is filed.
Not that I really care about the synagogue so much as I do your client - but if they made this mistake (which could possibly have been an innocent one) they could have made it on others - and unless caught soon enough - COULD POSSIBLY cause the synagogue to lose its tax exemption. | |
| 13 April 2009 | |
| I would suggest you have your client contact the synagogue office to get this clarified BEFORE the tax return is filed.
Not that I really care about the synagogue so much as I do your client - but if they made this mistake (which could possibly have been an innocent one) they could have made it on others - and unless caught soon enough - COULD POSSIBLY cause the synagogue to lose its tax exemption. | |
| April 13, 2009 | |
| D&T, many churches have educational functions. I don't think the synagogue is issuing donation receipts for tuition to avoid UBIT. As far as your client's example, rental income is only taxable if the building is mortgaged, and then only if > 15% of it is rented out. | |
| 13 April 2009 | |
| I think the church rent example is giving "donation" status for services/value received -- they were renting the church for a function -- probably a wedding. Again, misleading the taxpayer and the IRS because they are giving out receipts and stating that no services or goods were received in exchange for the gift.
As per the synagogue, it is probably not trying to avoid UBTI -- it is misleading tuition payers that their tuition is a charitable contribution when it really is not. I think I've even seen this in a court case (and the taxpayer lost). | |
Death&Taxes (talk|edits) said: | 14 April 2009 |
| Misleading is the point; before the 'crackdown' one always heard of church schools where checks were 'donations' and not tuition and everyone would nod, nod, wink, wink....you know what I mean.
However, some go out of their way to make sure the parishoner is not mistaken. Client makes a donation and has a Mass said for her late Mother; the Mass is open to all, of course. Church told her it is not a charitable donation for her because she received benefit from it. What do you think? | |
| April 14, 2009 | |
| I agree with the first point. I'm not sure about the second. Is this type of service something the church would normally charge for? If not, then I would be inclined to say it is a donation and include it in the intangible benefits the IRS allows to be excluded. | |
| 15 April 2009 | |
| Right Natalie, isn't number two an "intangible religious benefit"? | |
