TAX COURT OPINION

Case: Anonymous
Docket Number: 6851-08
Judge: Paris
Opinion Type: memo
Filed: 04/22/2010
Pages: 11

UNITED ' STATES 'TAX COUR T ANONYMOUS,, Petitioners . v . COMMISSIONER'°,OF'INTERNAL REVENUE, Respondent : Docket No . 6851 08 . Filed April 22201 0 Seale r petitioner s Sealed , for respondent APR LLunu MEMORANDUM FINDINGS OF FACT AND OPINIO N -2- PARIS, Judge : This record has been sealed' pursuant to section 7461(b)2 and Rule 103 . Respondent determined a deficiency of $5,903 in petitioners' Federal income tax for the tax year 2006 . After concessions,3 the Court must decide the following issues : (1) Whether petitioners are entitled to deduct under section 170, as charitable contributions, $25,050 in wire transfers4 petitioner wife made to her mother's cousin, who distributed the money for the benefit of the Catholic Church of a foreign country ; and (2) whether petitioners are entitled to deduct under section 170 the airfare expense petitioner wife incurred while rendering services to Catholic churches in a foreign . country . 'On Jan . 30, 2009, this'Court ordered the present record to be sealed pursuant to . sec . 7461(b) , and Rule 103 because the risk of extreme physical harm to petitioners outweighed the public interest to have access to the court records . The record demonstrated that petitioner wife already suffered actual harm, and there would be risk of the same physical harm being inflicted upon petitioner wife if the public had access to the records . See Anonymous v . Commissioner , 127 T .C . 89 (2006) . 2Unless otherwise indicated, all section references are to the Internal Revenue Code, as amended, and Rule references are to the Tax Court Rules of Practice and Procedure . 3Respondent conceded the other charitable contribution deductions petitioner's claimed for the tax year 2006 . 'Petitioner wife wired an aggregate of $25,050 but claimed $25,100 as a .charitable contribution deduction on petitioners' 2006 tax return . The amount at issue should then be $25,050 . -3- FINDINGS OF FACT Some of the facts have-been stipulated and are so found . The stipulation of,facts and the attached exhibits ar e incorporated herein by this<reference .' Petitioner husband'and petitioner wife .timely filed ; ajoint-tax return for the taxable year 2006. Respondent . issued a- notice of deficiency date d December 17, 2007, disallowing certain charitablecontributio n deductions they claimed for 2006 . Most of the-disallowe d deductions ,originated from petitioner wife's donations an d charity work for the benefit of . Catholic churches and their,.' members in a foreign country . Petitioners, who resided in Texas , timely filed a-petition . Petitioner husband did not appear i n person at,,,, the-,,, trial of the- ~case-At~ petitioners retained , counsel. to represent :, them . Petitioner wife was born in a'-foreign country . Her parents were ..devoutCatholics . Her father served as an, officer in tha t country's army- .during the conflict with the guerilla forces .. .Petitioner wife was a young girl?-when- the'guerrilla(cid:127)1forces f initiated a mili .tary- campaign . Petitioner-wife's uncle .was . a Catholic-, -priest in her hometown-., .- When ., the guerrilla forces ." seized her - hometown ,, : petitioner wife witnessed4 --over 400 of her° ; fellow Catholics, including her uncl e' and other citizens °''of her'' hometown, being buried alive .Petitioner : wife managed to escape the massacre . Nonetheless, the guerrilla forcesdestroyed :much -4- of her hometown, including the Catholic church and seminary . The foreign country's government eventually fell . Petitioner wife and her family later escaped from their country to the United States . Petitioner wife later married petitioner husband . Petitioner wife is now a U .S . citizen . She is a member of a church that-belongs to the local Catholic diocese near her home in Texas . In 1996 petitioner wife completed her college education and was hired as .an engineer at an international corporation . After completing college she returned to her native country an d witnessed extreme poverty : Her experience motivated her t o contribute money, and services to help rebuild-Catholic churches, in that- .country-. These Catholic-churches in'her'-native- .country: provided food, (cid:127) education , and shelter to the poor . During one o f .. r her- trips-to, her .;, native- country,,, the local polic e interrogated, petitioner.. wife ; about her activities,in,_the tow n .where she was born- and raised . ..- The police--also informe d petiti oner- . wife :- that,:,,;.they .- had - been monitoring her whereabouts -win .,, the .,country . and .were aware of her family's support,for the-:, forme r government, mentioning these facts : . Her~fatherhad served as a n officer in'the-former government's: army, and . later. was reeducated . . by ' the: present' government . after'the" former ,'government-,fell ;., and,: . her- uncl e siege of petitioner wife's original : hometown ; Fearing for her life, petitioner wife devised a plan to disguise her contributions to Catholic churches in her native country . She would wire themoney,to the personal bank account of her mother's cousin (cousin) who lived in petitioner wife' s .original hometown . The cousin . then . transferred the money to selected Catholic churches in that country . Other than her membership, in a Catholic church, the cousin does not have any formal role with the Catholic seminary or any other Catholic institutions located in that country . 'Pet-itioner wife wired-to the cousin's account $8,025, $4,000, $5,000, and $8,025 during the tax year 2006 . Petitioners claimed those amounts as ~ charitable contribution deductions on their joint income tax return for 2006 . Petitioners also claimed a . charitabl e contribution deduction .of:$.1,025 for. the airplane ticke t petitioner wife purchased in 20:06,, travel country ..- and provide-services to Catholic churches of that foreig n country . During her visitsto-her .native,country, . petitioner wife di d not work on behalf of_her local church while she was rendering any charitable services to Cathol-ic,churches 'n'that country . However, she-had informed her pastor of'her financial contributions and . her services to Catholic,churches in her native , section 501(c)(3) organization that supports the work,of missionaries . in her native country . Contributions to or for . the use of that organization may be deductible .'under section 170 . . -6- OPINION Section 170 allows taxpayers to claim a deduction for a charitable contribution if the contribution is made to, .or for . the use of a qualified organization . Only as a matter of legislative grace may a taxpayer claim a deduction' . See INDOPCO, Inc . v . Commmissioner , 503 U .S . 79, 84 (1992 .) ; New Colonial Ice Co . v . Helvering, 292 U .S . 435 (1934) . Petitioners bear the burden of proving that they are entitled under section 170 to the claimed charitable contribution deductions for wire transfers to the cousin, who distributed the money for-the benefit of Catholi c churches in, ar foreign" country . and . for any travel, expenses" . petitioner wife incurred-in the : performance of. her charitabl e services ..: in .. that 'country ., under: section : 170 .: : . PetitLone rs' _have - the :expenses :petitioner_ wife incurred in aiding . the needy in a foreign- country- .are . deductible :, under ._section- 17 0 as -donations- t o qualified- don e-es .' Section .170 (c) (2 ) identifies an eligibl e recipient o.f.a charitable deduction as "a corporation, trust, . or community chest, ., fund, . or foundation .* * * created or organize d in the United ; Stalest or. * * * _ under= :the<: law, of,,, the Unite d States Therefore , this Court. concl udes- , that petitioners~ .ar e not entitled'to , their claimed charitable contribution deductions -7- under section 170 . ° I . Wire Transfers to a Foreign Countrv ° Petitioners contend that petitioner.. wife's wire transfers are deductible undersection.170 .. Petitionersargue that the ultimate beneficiary of'the wire transfers wasIthe Roman Catholic Church, a qualified donee under section 170 ( c)(2),-and .that petitioner wife thus made the wire transfers to or for the use of a qualified organization . Relying on Winn v . Comm issioner , 595 F : 2d I060G ( 5th Cir . 1979), affg . in part and revg . impart 67 T .C . 499 ( 1976), petitioners dispute respondent ' s contention that the transfers- went to or for the use :-of an organization in a foreign country . This Court disagrees with petitioners that they-donated th e proceeds of .the wire transfers to or ; for the use of a qualified organization under section 170(c)(2) . Section 170(c)(2) defines "charitable contribution" as a contribution or gift,"to or for the use of an organization "created or .organized-' " in the . United States ,.* * * or under, the law of- the United . States The Court of Appeals for the Fifth= Circuit,,;..revers ing , in4 part . the Tax : Court decision in_, Winn v . Commissioner supra , held tha-t'the taxpayers made a deductibl e charitable contribution of funds for the ; use of the . Benoit Presbyterian Church, which was created in the United States, -8- where an officer of the church received the donation at an event it sponsored and subsequently those funds were used, as the church intended, to support missionary work in a foreign country . The Winn case differs from the present case . Petitioner wife did not make the wire transfers to or for the use of an organization 'created or organized in the United States or under the laws of the United States . Petitioner wife's contributions were made to her mother's cousin, who distributed them for .the benefit of foreign Catholic churches . Therefore, her wire transfers of $25,050 are not deductible as charitable contributions . Petitioners posit that the Catholic Church is a universal organization, and therefore Catholic churches in petitioner wife's native country are qualified as donees .under section 170 . Petitioners' argument is flawed . On this record, the Court ha s no,..basis to find that the Catholic . churches in that foreign country to which petitioner wife's wire transfers were distributed were created or organized, in the United States . or under the laws of the United States . The language of section 170(c)(2) is explicit, and this Court must follow such plain language . In arguing that the wire transfers were made for the use of a qualified organization, petitioners rely on Davis v . United . States , . 495 .,U .S . 472 (1990) . In, Davis , the Supreme Cour t interpreted the phrase "for the use of" a : qualified .organization _g_ . to connote that the donation be toa legally,, enforceable trust or a similar legal arrangement for the benefit of the qualified organization . - Id . at'485 . The charitable beneficiary must have a legal right to constrain the trustee to comply with the terms of the trust relationship . j d at 483 . Petitioners, misinterpret- Davis . Even if.'the Court were to assume for the sake of : argument : that the,:cousin received the wire transfers in trust for the benefit of Catholic churches in that foreign country,' the Court has already concluded that these, churches have not , been-shown to qualify as organizations under section 170(c)(2) and(cid:127) .therefore that petitioners' case does-not come within the purview of Davis . Thus, no. charitable contribution deduction for th e wire transfers i s allowable, under , section 170(c)(2) . II ._ Airfare to-a ForeiQn Country Petitioners claim the cost of petitioner wife' s airfare as a deductible unreimbursed expenditure incurred in the rendition of services ;to,a qualified organization under section 170 . Thi s Court, dis'agtees with petitioners. . _A ; taxpayer is permitted deduct under section'170'an unreimbursed expenditure made : incident to,%theyrendit on'of( ., services to .an° organization -that is . qualified recipient of :,char,itable contributions . Sec . 1 .170 A 1(g), Income-Tax Regs . These expenditures include transportation (cid:127) -expenses and reasonable expenses for meals and lodging while away -10- from home . Id . Petitioners assert that the unreimbursed expenditure incident to petitioner wife's services during the year in controversy should be deductible under section 170 because petitioner wife worked on behalf of several qualifie d organizations . Nonetheless, petitioners have failed to show that any of the Catholic churches in the foreign country to which petitioner wife's rendered services is a qualified organization within the meaning of section 170(c)(2) . Petitioners also assert that petitioner wife provided missionary services on behalf o f her local Catholic diocese . Nonetheless, her local diocese di d .not .:have,controt, over .petitioner wi-f el, s(cid:127), servi .ce.s_, p.rovided~ . to th e Catholic . churches -in the foreign country, and-no legall y enforceable -trust .or, similar-lega l arrandement existed betwee n her local church (as a member o f that= diocese )-and'pe .titione r wife . direction of, -° or to or ' forthe use - . of ' her -local'°'church-or -th e local diocese . The record shows only that her"priestat her, local church had some awareness of her work in her native country- . Nor(cid:127)is-there any evidence that petitioner . wife . provide d those . services- during the year '-in controversy- to :.or.. for- the- use . : of the section 501(c )( 3) organization of which she did not becom e -11 a member until 2007 . Conclusio n The Court finds petitioner wife's testimony to be sincere and . has no doubt that her actions were brave and heartfelt . However, petitioners have failed to prove that they contributed to a qualified organization under section 170 . Consequently, petitioners are not entitled to their claimed charitable contribution deductions for 2006 . Decision will be entered under Rule 155 .