T.C. Mem o. 2 01 6- 16 7

UNITED STAT ES TAX COURT

RONALD W . WHITE, Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 26 16 -1 3. Fi le d S ep te m be r 12 , 20 16 .
Sco ttW . Gros s, fo r pe ti ti on er. Tho m as AlanFri da y , forres po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION PARIS , Ju dg e: In ano ti ce o f de fic ie nc y da te d No ve m

be r 6, 2 01 2, res po nd en t d et erm in edFed eral in co m e ta x d efi ci en ci es an d a dd it io ns to tax as fo ll ows : 1
Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o t he Int ern al 1 (co nt in ue d...)- 2 -

[* 2] Add it io ns to tax Year Defi ci en cy Sec. 6 65 1( a)(1 ) Sec. 6 65 1( a)(2 ) Sec. 6 65 4 20 06 $3 2,8 53 $7 ,39 1.9 3 $8 ,21 3.2 5 $1 ,55 4.7 5 20 07 9,2 34 2,0 77 .65 2,3 08 .50 42 0.2 4 20 08 8,0 96 1,8 21 .60 1,7 40 .64 26 0.1 6 20 09 52 ,02 7 11 ,70 6.0 8 8,0 64 .19 1,2 45 .64 Afte r co nc es si on s, th e is su e fo r de ci si on is whet he r pe ti ti on er’s v ow o f 2 po ve rty caus es hi m

to be ex em

ptfro m li ab il it y forFed eral in co m e ta x a ndsel fem pl oym en t t ax es . FINDINGS OF FACT So m e o f th e fac ts are s ti pu la te d a ndare s o fo un d. Th e st ip ul at io n o f fac ts an d t he ex hi bi ts att ach edth eret o a re i nc or po rat edhe rei n b y

th is refe ren ce. Pet it io ne r res id edinFlo rid a atth e ti m e h e ti m el y fil edhi s p et it io n. Pet it io ne r ha s b eena pa st orforov er 3 0 years. In 19 83 pe ti ti on er es tabl is he d t he W or ldEvan ge li sm Outreac h C hu rch (W EOC) in DeFu ni ak (...co nt inue d) 1 Rev enue Co de ineffe ctforth e y ears at i ss ue , andall Ru le refe ren ces are t o t he Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. The pa rti es ha ve ag reedth atth e am ou nt s o f un rep orte d i nc om e atis su e are 2 si gn ifi can tl y

lo wer tha n t he am ou nt s s etforthinth e st atut ory no ti ce o f de fic ie nc y , as di sc us se d i nf

ra p . 4. Inad di ti on , th e p art ie s h av e ag reedth atif t he Co urt fi nd s th atth ere i s a d efi ci en cy , th e ad di ti on s t o t ax un de r se cs . 66 51 (a)( 1) an d (2 ) an d 66 54 wou ldbe co m

pu ta ti on al
.- 3 -

[* 3] Sp rin gs , Flo rid a. Duri ng th e y ears at i ss ue pe ti ti on er was th e p as to r of W EOC. As W EOC’s pas to r, pe ti ti on er m in is te redfro m th e p ul pi t an d a t n ur si ng ho m es , hel pe d b ui ldchur ch es on for ei gn so il , est ab li sh eda feed in g p ro gr am for ch il dr en , andsupp orte d wi do ws an d o rp ha na ge s. In20 01 pe ti ti on er re co m

m en de d t o WEOC’ s b oa rdof a dv is ers th atW EOC be res tru ctur edto in cl ud e a co rp or at io n s ol e as anoff ic e o f th e chur ch . The b oa rd of advi se rs un an im ou sl y

ag reedwith p et it io ne r’s reco m m en da ti on , andon Octo be r 5, 2 00 1, a d om es ti c n onpr of itco rp or at io n s ol e o f W EOC reg is te redas “ The Offic e of Pres id in g Hea d Ap os tl e, of Ro na ldW ayne Whi te ” was crea te d i n t he Sta te of Nev ad a. Altho ug h t he co rp or at io n s ol e was reg is te redas aNeva daen ti ty, W EOC co nt in ue d t o o pe rat e in Flo rid a. On No ve m

be r 27 , 20 01 , pet it io ne r si gn eda do cum en t en ti tl ed“ Vow o f Po ve rty” det ai li ng th athe ag reedto di ve sthi s p ro pe rty andfutur e in co m e to W EOC an d i n turn WEOC wou ldpro vi de forhi s p hysic al , fin an ci al , andpe rs on al ne ed s. By reso lu ti on , W EOC res ol ve d i n p artth at“ [t]he chur chacce pt s * * * [p et it io ne r’s] decl arat io n a nd* * * wi ll pro vi de all hi s n eed s as Apo st le of t hi s ch ur chmin is try * * * [W EOC] sh al l p ay hi s h ou si ng , all m in is try exp en se s, an d
an y ot he r ne ed s n eces sa ry

forhi s ca re.” WEO C es tabl is he d a n apo st ol ic ba nk acco un t, an d p et it io ne r ha d “ si gn at ory au th or it y ov er thi s ac co un t fo r hi s u se .”- 4 -

[* 4] Pet it io ne r di d n otfil e a Fed eral in co m e ta x re tu rnforan y of t he y ears at is su e, no r di d h e fi le a ti m el y cert ifi cat e o f ex em

pt io n fr om

sel f-em pl oym en t t ax in acco rd an ce wi th sec ti on 14 02 (e). Re sp on de ntpre pa reda subs ti tu te forreturn fo r each y ear a t i ss ue an d i ss ue d ano ti ce o f de fic ie nc y de te rm in in g t ha t p et it io ne r ha d un rep orte d i nc om e fo r pa y m en ts va rio us en ti ti es m ad e d ire ct ly to h im or o n h is be ha lf. Befo re tria l the pa rti es ag reedth atth e o nl y am ou nt s o f un rep orte d i nc om e 3 st il l atis su e were $ 46 ,64 2, $ 18 ,43 0, $ 16 ,82 4, an d $ 26 ,86 5 fo r 20 06 , 20 07 , 20 08 , The no ti ce o f de fic ie nc y

de te rm in edth atpe ti ti on er h adun rep orte d i nc om e 3 fro m th e fo ll owi ng en ti ti es : LeSh ea En te rp ris es , LLC, an en ti ty in wh ic h pe ti ti on er o wne d 5 %; M ajes ty Com m un ic at io ns , LLC, W EOC’s rel ig io us te le vi si on st at io n; Ro na ldW ayne Whi te , A Corp or at io n S ol e o f W EOC; G & J Hol di ng , a ret ire m en t tru stinwhi chpe ti ti on er i s a t ru st ee; an d Gu lf TV, LLC, an en ti ty owne d b y

pe ti ti on er an d h is m ot he r. The re co rddo es no t re fle ctwhet he r en ti ti es ot he r th anMajes ty Comm un ic at io ns , LLC, andRo na ldW ay ne Whi te , A Co rp or at io n S ol e, were re la te d t o WEOC. T he un rep orte d i nc om e as setforth in th e n ot ic e o f de fic ie nc y

is as f ol lo ws: Ent it y 20 06 20 07 20 08 20 09 LeSh ea En te rp ris es , LLC $7 ,96 1.8 0 $7 ,13 2.2 3 $3 ,12 3.4 7 $7 ,35 4.1 1 Majes ty Comm

un ic at io ns , LLC 54 ,97 5.2 7 26 ,18 6.6 9 26 ,29 1.2 9 23 ,86 3.0 0 Ro na ldW ayne Whi te , A Cor po rat io n S ol e 37 ,98 8.2 6 5,6 36 .12 5,6 36 .12 21 ,94 9.1 6 G & J Ho ld in g 10 0,0 80 .00 Gul f TV, LLC 2,7 21 .71 Total s 10 0,9 25 .33 38 ,95 5.0 4 35 ,05 0.8 8 15 5,9 67 .98- 5 -

[* 5] an d 2 00 9, re sp ect iv el y . The p art ie s d idno t p ro vi de th e Co urt wi th a br eak do wn d et ai li ng th e so ur ce o f th e unr ep orte d i nc om e st il l atis su e, bu t attri al
an d o n b rie f th e p art ie s ag reedth atth e unr ep orte d i nc om e st il l atis su e rep res en ts pa ym en ts th atW EOC or e nt it ie s re la te d t o WEOC m ad e o n p et it io ne r’s be ha lf. Pet it io ne r do es no t d is pu te th atW EOC or i ts rel at eden ti ti es m ad e th os e p aym en ts on hi s b eh al f fo r hi s p ers on al ex pe nd itur es . The o nl y rem ai ni ng is su e is whet he r pe ti ti on er’s v ow o f po ve rty ins ul at es hi m fro m pa y in g F ed eral in co m e ta x andsel fem pl oym en t t ax on th os e am ou nt s. OPINION I. Bu rd enof P ro of Gen eral ly, th e Co m

m is si on er’s d et erm in at io ns setforth ina no ti ce o f de fic ie nc y

are p res um edco rrec t, an d t he tax pa y er b ears th e b ur de n o f sh owi ng th e de te rm in at io ns are i n e rro r. Ru le 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. 11 1, 1 15 (1 93 3) . Whe n acas e in vo lv es un rep orte d i nc om e, th e U.S. Co urt o f App eal s fo r th e Ele ve nt h C irc ui t, t o wh ic h a n app eal inth is cas e wou ldli e ab se nta st ip ul at io n to th e co nt rary, has he ldth atth e Co m m is si on er’s d et erm in at io n o f un rep orte d in co m e is en ti tl edto a pr es um pt io n o f co rrec tn es s o nl y

if t he de te rm in at io n i s supp orte d b y

m in im al ev id en ti ary fo un da ti on li nk in g the tax pa y er t o an i nc om epr oduc in g a ct iv it y . See Bl oh m v. Co m m is si on er, 9 94 F.2d15 42 , 15 49 (11 th Cir
.- 6 -

[* 6] 19 93 ), aff’g T.C. Me m o. 1 99 1- 63 6. On ce the Co m m is si on er p ro du ces ev id en ce l in ki ng th e ta xp ay er t o a n i nc om e-p ro du ci ng act iv it y , th e p res um pt io n o f co rrec tn es s ap pl ie s an d the burd enof p ro du ct io n s hi fts to th e ta xp ay er t o re bu t tha t pr es um pt io n b y est ab li sh in g t ha t the Co m m is si on er’s d et erm in at io n i s arbi tra ry or erro ne ou s. Id
. Pet it io ne r do es no t d is pu te th atW EOC or i ts rel at eden ti ti es pa idth e am ou nt s atis su e o n h is be ha lf. Re sp on de ntha s es tabl is he d t he requi si te m in im al ev id en ti ary fo un da ti on by lin ki ng pe ti ti on er an d h is act iv it ie s as a pa st or to th e pa ym en ts W EOC or i ts rel at eden ti ti es m ad e o n h is be ha lf. Th eref or e, pe ti ti on er ha s t he bu rd enof p ro of

. II. Gro ss Inc om e an d Vo w of Po ve rty Pet it io ne r ackno wled ge s tha t WEOC or it s re la te d e nt it ie s m ad e p aym en ts on hi s b eh al f fo r hi s p ers on al ex pe ns es . Peti ti on er’s p rimary co nt en ti on is th athi s vo w of p ov erty

in su la te s h im

fro m be in g t ax edon th e co m

pe ns at io n h e rec ei ve d fo r hi s s erv ic es to W EOC. Sect io n 6 1( a) d efi ne s g ro ss in co m e as “ al l i nc om e fro m what ev er s ou rce de riv ed ”, in cl ud in g c om

pe ns at io n fo r se rv ic es . This de fin it io n i nc lu de s al l acce ss io ns to weal th , cle arl y real iz ed , andov er wh ic h t he tax pa y ers ha ve co m pl et e do m in io n. Co m

m is si on er v . Glen sh aw Glas s C o., 3 48 U.S. 42 6, 4 31 (19 55 ). A- 7 -

[* 7] ta xp ay er h as do m in io n a ndco nt ro l wh enth e ta xp ay er i s fr ee t o u se th e fu nd s atwil l. Ru tk in v. Un it edSta te s, 3 43 U.S. 13 0, 1 37 (19 52 ). The u se of f un ds for pe rs on al pu rp os es in di cat es do m in io n a ndco nt ro l, ev enov er anacco un t t it le d i n th e n am e o f a ch ur ch or o th er re li gi ou s o rg an iz at io n. Co rte s v . Comm is si on er, T.C. Mem o. 2 01 4- 18 1, at*8 (ci ti ng Gardne r v. C omm is si on er, T.C. Mem o. 2 01 3- 67 , at * 13 ). Pet it io ne r ackno wled ge s i n h is bri ef tha t thi s C ou rt h as de al t wi th factua ll y si mil ar ca se s i n the pa stinCo rte s v . Comm is si on er, T.C. Mem o. 2 01 4- 18 1, Ro ge rs v. Co m m is si on er, T.C. Mem o. 2 01 3- 17 7, an d Gu nk le v. Co m m is si on er, T.C. Mem o. 2 01 2- 30 5, af

f’d, 75 3 F .3d50 2 (5 th Cir . 20 14 ). Thi s C ou rt h as pre vi ou sl y he ldth ata vo w of p ov erty do es no t i ns ul at e a p as to r fro m tax li ab il it y

ev enwhen th e p as to r rec ei ve s fu nd s d ire ct ly from hi s ch ur chinex ch an ge forservi ces ren de redif t he pa st ordo es no t re m itth os e fund s t o t he chur chinacco rd an ce wi th hi s v ow o f po ve rty, has co nt ro l o ve r th e fu nd s, an d u se s t he fun ds forpe rs on al ex pe nd itur es . See Co rte s v . Comm is si on er, at*8 -* 10 ; Ro ge rs v. Co m m is si on er, at *8 -* 9; Gun kl e v . Comm is si on er, at*7 -* 10 . Pet it io ne r arg ue s t ha t the Co urt’s d eci si on s i n C orte s, Ro ge rs , andGun kl e co nt ai n fl awedreas on in g a nddo no t d ire ct ly addres s t he is su e athand --tha t i s, whe th er a p as to r of

a chur chwho ex ecu te s a v ow o f po ve rty to h is chur chan d- 8 -

[* 8] rece iv es pa ym en ts forhi s wel l-b ei ng fro m th atchur chis in su la te d fr om tax li ab il it y . Peti ti on er as se rts th atm an y of t he cas es cit edby thi s C ou rt i n re ach in g it s co nc lu si on s i n C orte s, Ro ge rs , andGun kl e are in ap pl ic ab le be cau se th ey ad dr es s s itua ti on s wh ere t ax pa y ers earn m on ey fro m a th irdpa rty (no t the rel ig io us or de r) an d t he n a ss ig n tha t m on ey to a rel ig io us ord er i n a cco rd an ce wi th th ei r vo ws o f po ve rty. In su cha si tu at io n, the U.S. Cou rt o f App eal s fo r th e Ele ve nt h Ci rcu itha s s ta te d tha t p aym en ts or b en efi ts rece iv edinex ch an ge forservi ces ren de redby ind iv idua ls no t o n b eh al f of a se pa rat e an d d is ti nc t p rin ci pa l ar e ta xabl e to th e in di vi du al s. See Po ll ardv. Co m m is si on er, 7 86 F.2d10 63 , 10 65 (1 1t h C ir. 1 98 6) , aff’g T.C. Mem o. 1 98 4- 53 6. Pet it io ne r’s arg um en t, h owe ve r, is m is gu id ed . The Co urt h as pre vi ou sl y no te d t ha t ca se s i n wh ic h atax pa y er re cei ve s m on ey fro m a th irdpa rty (a party ot he r th anth e rel ig io us ord er) a ndrem it s t ha t m on ey to th e rel ig io us ord er i n acco rd an ce wi th hi s v ow o f po ve rty are factua ll y di st in gu is habl e fro m

cas es in whi cha ta xp ay er ex ecu te s a v ow o f po ve rty to arel ig io us ord er an d re cei ve s m on ey di rect ly from

th e rel ig io us ord er. See Co rte s v . Commis si on er, at*9 ; Ro ge rs v. Co m

m is si on er, at*8 -* 9. Pet it io ne r di d n otrece iv e a s al ary fro m a th irdparty. Peti ti on er p ro vi de d se rv ic es to W EOC an d re cei ve d c om pe ns at io n d ire ct ly from

W EOC inth e fo rm

of- 9 -

[* 9] pa ym en ts W EOC or i ts rel at eden ti ti es m ad e o n h is be ha lf. Pe ti ti on er as se rts th atbe cau se he rece iv edth e m on ey di rect ly from

W EOC or i ts rel at eden ti ti es aft er h e si gn eda vo w of p ov erty , itis no t t ax ab le
. Pet it io ne r ap pe ars to rel y on th e In te rn al Rev enue Serv ic e’s or ig in al off ic ia l publ ic pro no un cem en t re ga rd in g t he vo w of p ov erty , O.D. 11 9, wh ic h was publ is he d i n 1 91 9. Se e O.D. 11 9, 1 91 9- 1 C .B. 82 . In p art , O.D. 11 9 s ta te d: “ A cl erg ym anis no t l iabl e fo r an y in co m e ta x o n the am ou ntrece iv edby him du rin g th e y ear f ro m th e p ari sh of wh ic h h e is inch arg e, pr ov id edth athe tu rn s o ve r to th e rel ig io us ord er o f whi ch he is a m em be r, al l the m on ey

rece iv edinex ces s o f hi s actua l l iv in g e xp en se s, o n a cco un t o f th e v ow o f po ve rty whic h h e h as tak en .” Aga in , pet it io ne r’s arg um en t i s m is gu id ed . Rev . Rul . 77 -2 90 , 19 77 -2 C.B. 2 6, supe rs ed es O.D. 119 . Rev . Rul . 77 -2 90 , supr a, st at es th atin co m e earne d b y a m em be r of a rel ig io us ord er o n a cco un t o f se rv ic es pe rfo rm eddi rect ly for the or de r orforth e ch ur chwith wh ic h t he ord er i s af fil ia te d a ndrem it te d b ackto th e or de r in co nf

orm it y with t he m em

be r’s vo w of p ov erty

is no t i nc lu di bl e in th e m em be r’s gr os s i nc om e. As was th e cas e wit h t he tax pa y ers inCo rte s an d R og ers , th e cri ti cal di ffer en ce i n t hi s ca se is th atpe ti ti on er d idno t re m itin co m e to W EOC pu rs ua ntto hi s v ow o f po ve rty. Peti ti on er h adsi gn at ory au th or it y ov er the W EOC ap os to li c b an k a cco un t, an d t he pa ym en ts W EOC m ad e o n h is be ha lf s erv edon ly- 10 -

[* 10 ] to be ne fitpe ti ti on er i n m eet in g h is li vi ng ex pe ns es . The co m pe ns at io n pe ti ti on er re cei ve d fr om

W EOC--i n t he form

of p aym en ts W EOC or i ts rel at ed en ti ti es m ad e o n h is be ha lf- -m us t b e in cl ud edinhi s g ro ss in co m e. See Po ll ardv. 4 Co m m is si on er, 7 83 F.2dat 1 06 5- 10 66 ; Co rte s v . Comm is si on er, at*9 -* 10 ; Ro ge rs v. Co m

m is si on er, at*9 -* 10 . III. Sel f-Em

pl oym en t Tax Sect io n 1 40 1 i m

po se s a t ax on anin di vi du al ’s sel f-em pl oym en t i nc om e, whi chis de fin edas t he “ ne t ea rn in gs fro m sel f-em pl oym en t” de riv edby an in di vi du al du rin g atax ab le y ear. Se c. 14 02 (b ). “ Net e arn in gs fro m

sel fem pl oym en t” is th e g ro ss in co m e d eri ve d b y anin di vi du al fro m

an y tra de or bu si ne ss carr ie d o n b y

th atin di vi du al les s t ha n d educ ti on s at tri bu tabl e to th attra de orbu si ne ss . Sec. 1 40 2( a). Pu rs ua ntto sec ti on 14 02 (c)( 4) , a “ du ly ord ai ne d, co m m is si on ed , or l ic en se d m in is te r of a ch ur chinth e ex erci se of h is m in is try” is en ga ge d i n c arrying on a tr ad e o r bu si ne ss un le ss th e m in is te r is ex em ptfro m sel fAs n ot edsupr a p p. 4 -5 , altho ug h t he pa rti es ag reedth atth e unr ep orte d 4 in co m e st il l atis su e rep res en ts pa ym en ts th atW EOC or i ts rel at eden ti ti es m ad e on pe ti ti on er’s b eh al f, th e p art ie s d idno t p ro vi de th e Co urt wi th a br eak do wn de ta il in g t he so ur ce o f th e in co m e. The s ou rce o f th e unr ep orte d i nc om e--wh ethe r itrep res en ts am ou nt s WEOC or i ts rel at eden ti ti es pa idto pe ti ti on er o r onhi s be ha lf o r am ou nt s t ha t a t hi rdpa rty (an en ti ty oth er than WEOC or i ts rel at ed en ti ti es ) pa idto pe ti ti on er o r on hi s b eh al f--wo ul d n otaffe ctth e Co urt’s h ol di ng in th is cas e b ecau se pe ti ti on er d idno t re m itth e in co m e b ackto W EOC pu rs ua ntto hi s v ow o f po ve rty.- 11 -

[* 11 ] em pl oym en t t ax purs uantto sec ti on 14 02 (e). Un le ss anex em pt io n cert ifi cat e is ti m el y

fil ed , th e m in is te r is li ab le for sel f-em pl oym en t t ax on in co m e de riv edfro m

th e m in is try. Sec. 1 40 2( e)(3 ). The t im e li m it at io n i m po se d b y 5
se ct io n 1 40 2( e)(3 ) is m an da to ry an d i s t o b e co m

pl ie d wi th st ric tl y . W in go v. Co m m is si on er, 8 9 T.C. 9 22 , 93 0 (1 98 7) ; Ro ge rs v. Co m m is si on er, at*7
. Pet it io ne r di d n otfil e a t im el y ap pl ic at io n fo r ex em

pt io n fr om

sel f-em pl oym en t ta x fo r an y

of t he y ears at i ss ue . Peti ti on er the refo re d oe s n otqu al ify for an ex em pt io n fr om

sel f-em pl oym en t t ax . The Co urt h as co ns id eredall of t he arg um en ts m ad e b y th e p art ie s, an d t o th e ex te ntth ey

are n otad dr es se d h erei n, the y are co ns id eredun ne ces sa ry , m oo t, irr el ev an t, o r wit ho utm eri t. To re fle ctth e fo reg oi ng an d t he co nc es si on s o f th e p art ie s, Deci si on wil l b e en te red un de r Ru le 15 5.

The op erat iv e d oc um en t u se d t o app ly for thi s ex em pt io n i s Fo rm

43 61 , 5 App li cat io n fo r Exe m

pt io n F ro m

Sel f-Em pl oym en t Tax forUse b y Mi ni st ers , Mem be rs of R el ig io us Orde rs an d C hr is ti anSci en ce Pr act it io ne rs .