DocketNumber: Docket No. 20161-81
Citation Numbers: 81 T.C. 806, 1983 U.S. Tax Ct. LEXIS 16, 81 T.C. No. 49
Judges: Parker
Filed Date: 10/26/1983
Status: Precedential
Modified Date: 1/13/2023
*16
Ps, H & W, claimed deductions for charitable contributions to the "Universal Life Church." W received an honorary Doctor of Divinity "degree" and a Doctor of Universal Life "degree" from the Universal Life Church, Inc. Ps also received a charter from Universal Life Church, Inc., for a congregation or chapter of their own. W opened two checking accounts in the name of Universal Life Church over which she had sole signatory power. H drew checks on his personal account payable to Universal Life Church. W endorsed one of these checks and purchased a cashier's check with the proceeds. The rest of the checks were deposited in the Universal Life Church checking accounts over which W had sole signatory power. H & W used their personal checking accounts and the two Universal Life Church accounts over which W had sole signatory power interchangeably to pay various personal and family expenses.
*807 Respondent has determined the following deficiencies in, and additions to, petitioners' Federal income taxes:
Year | Deficiency | Sec. 6651(a) 1*21 | Sec. 6653(a) 2 |
1976 | $ 7,288 | 0 | $ 364 |
1977 | 11,902 | 0 | 780 |
1978 | 11,422 | 0 | 571 |
1979 | 11,989 | $ 304 | 805 |
The following issues are presented for our determination: (1) Whether petitioners are entitled to charitable contributions deductions under
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.
Petitioners resided in Anchorage, Alaska, at the time they filed their petition in this case. Petitioners filed joint Federal income tax returns for the calendar years 1976, 1977, 1978, and 1979 with the Internal Revenue Service. Petitioners signed their 1979 return on June 30, 1980, and the Internal Revenue Service Center at Ogden, Utah, received their 1979 return on July 7, 1980.
During all of the years in issue, petitioner James J. Davis (Mr. Davis) was employed in Alaska by Page Communications-Alaska, Inc., and he resided in Alaska. During 1976 and part of 1977, petitioner Peggy Davis (Mrs. Davis) worked *22 as a real estate broker and resided in Cocoa Beach, Fla. Sometime in 1977, she moved herself and her two children to Alaska to be with Mr. Davis. Mrs. Davis worked for various employers in Alaska for the remainder of 1977 and during 1978 and 1979.
Mrs. Davis received an honorary Doctor of Divinity "degree" from the Universal Life Church, Inc. (ULC, Inc.), dated June 3, 1975. That document, No. 12,477, purported to be signed by Kirby J. Hensley, D.D., President, Universal Life Church, Inc., whose headquarters was listed on the document as P.O. Box 3528, Phoenix, Ariz. 85030. Petitioners received another document, No. 13,470, dated September 4, 1975, from ULC, Inc., labeled as a "Charter" that provided:
CHARTER
This is to certify that
*809 That document listed the headquarters of ULC, Inc., as 601 Third Street, Modesto, Calif. 95351. Mrs. Davis also received a Doctor of Universal Life "degree," dated September 8, 1975, from ULC, Inc. That document referred to her as the "Reverend Peggy Davis" and was also purportedly*23 signed by Kirby J. Hensley, D.D., President, Universal Life Church, Inc., whose headquarters was listed on the document as P.O. Box 3528, Phoenix, Ariz. 85030. While we have referred to both the entity in Modesto, Calif., and that in Phoenix, Ariz., as "ULC, Inc.," the record does not establish whether this is one corporation or two separate corporations. The record does not establish that petitioners ever set up a corporation or other separate legal entity after receiving their charter for the Universal Life Church of Cocoa Beach, Fla.
During the years 1976 through 1979, Mrs. Davis had sole signatory control over a checking account (No. 52-0-883-4) in the name of Universal Life Church, P.O. Box 335, Cocoa Beach, Fla. 32931, with the United National Bank in Cocoa Beach, Fla. That account was
During 1977, 1978, and 1979, Mrs. Davis had sole signatory control over a checking account (No. 00-04627-2) in the name of Universal Life Church, 1-D-6 Fairview Manor Apts., Fairbanks, Alaska*24 99701, or P.O. Box 2757, Fairbanks, Alaska 99707, with the First National Bank of Fairbanks in Fairbanks, Alaska. That account was
In 1979, Mrs. Davis had signatory control over six certificate-of-deposit accounts in the name of Universal Life Church with the Arctic First Federal Savings & Loan Association in Fairbanks, Alaska. Those certificate-of-deposit accounts were
Neither the Universal Life Church, Inc., of Modesto, Calif.*25 (ULC Modesto), nor ULC, Inc. (which may be the same entity as ULC Modesto), had any control over, or ownership interest in, any of the Universal Life Church accounts over which Mrs. Davis had signatory authority. ULC Modesto left to petitioners the manner in which petitioners' Universal Life Church "congregation" would raise and spend money. The record does not establish whether or not petitioners had a Universal Life Church "congregation" in Cocoa Beach, Fla., or in Alaska during the years before the Court.
On December 27, 1976, petitioners took out a loan in the amount of $ 28,300 with the First Federal Savings & Loan Association in Cocoa Beach, Fla. They used the funds to purchase a condominium in Cocoa Beach. Petitioners continued to own the condominium during 1977, 1978, and 1979. Mrs. Davis paid at least part of the mortgage payments on the condominium with checks from the Universal Life Church accounts, over which she had sole signatory authority. Petitioners deducted the interest from this mortgage loan on their 1976, 1977, 1978, and 1979 joint returns.
During the years in issue, Mr. Davis maintained a checking account at the Alaska National Bank of the North in Fairbanks, *26 Alaska. During 1978 and 1979, Mr. Davis also maintained a checking account at the United National Bank in Cocoa Beach, Fla. During 1976, 1977, and 1978, petitioners maintained a joint checking account at the United National Bank in Cocoa Beach. During 1978 and 1979, Mrs. Davis maintained a checking account at the First National Bank of Fairbanks in Fairbanks, Alaska. During the years in issue, petitioners used these various personal checking accounts and the two Universal Life Church accounts over which Mrs. Davis had sole signatory power interchangeably to pay various personal expenses, including mortgage loan payments on petitioners' Cocoa Beach condominium, telephone and utility expenses, credit card payments (American Express, Sears-Roebuck, J. C. Penney, Montgomery Ward), newspapers, and payments on personal loans. Mrs. Davis also drew on her *811 Universal Life Church accounts many checks in large amounts made out to cash, to petitioners, and to their children. 3
*27 In June of 1977, petitioners opened a joint account in Mr. Davis' name with the Alaska Teamsters Federal Credit Union. Petitioners earned interest on their account with the Alaska Teamsters Federal Credit Union during 1978 and 1979 in the respective amounts of $ 263.55 and $ 1,795.68. Petitioners reported no interest income on their 1978 and 1979 joint returns.
On October 16, 1979, Mr. Davis opened an account in his own name with Dean Witter Reynolds Inc. Mr. Davis earned $ 205 of "nonqualifying" dividends 4 on his account with Dean Witter during 1979. Petitioners reported no dividend income on their 1979 joint return.
During the years in issue, Mr. Davis wrote checks on his personal account at the Alaska National Bank of the North payable to the Universal Life Church, totaling the following amounts:
Year | Total amount |
1976 | $ 25,500 |
1977 | 30,000 |
1978 | 40,000 |
1979 | 40,000 |
*28 With the exception of one check for $ 25,000 in 1977, all of these checks were deposited to the Universal Life Church checking accounts under the sole signatory control of Mrs. Davis. The $ 25,000 check in 1977 was endorsed by Mrs. Davis at the First National Bank of Fairbanks, where one of her Universal Life Church accounts was located, and Mrs. Davis used the proceeds to purchase a cashier's check. The record does not establish that ULC Modesto or ULC, Inc. (which may be the same entity as ULC Modesto), ever received any money from petitioners during the years in issue.
*812 Petitioners claimed deductions for charitable contributions to the Universal Life Church on their returns for 1976, 1977, 1978, and 1979 in the respective amounts of $ 21,768, $ 29,232, $ 28,469, and $ 29,531. 5 In 1976 and 1979, the "recipient" was identified as the "Universal Life Church." In 1977 and 1978, the "recipient" was identified as the "Universal Life Church of California." In his statutory notice, respondent disallowed petitioners' claimed charitable deductions to the Universal Life Church for all 4 years and determined that petitioners were liable for the delinquency addition (
OPINION
On brief, petitioners ask the Court to reconsider three evidentiary rulings made at trial: (1) The denial of petitioners' motion to quash respondent's subpoenas requiring them to testify; (2) the denial of petitioners' motion to exclude from evidence certain "church" *30 banking records of the "Universal Life Church"; and (3) the exclusion from evidence of certain documents from the Universal Life Church, Inc., of Modesto, Calif. (ULC Modesto), purporting to evidence its "receipt" of petitioners' alleged contributions to it for the years before the Court.
A.
B.
C. "
*35 In view of Hensley's testimony as to the source of the information in those records and how ULC Modesto obtained the information, we seriously doubt that such records, even if produced, would constitute business records of ULC Modesto.
Accordingly, we adhere to our previous evidentiary rulings.
Petitioners argue that their claimed deductions for payments to "Universal *36 Life Church" are allowable charitable contributions. Petitioners apparently are not directly claiming that ULC Modesto's specific exemption (see
*37
Deductions are a matter of legislative grace, and taxpayers must satisfy the specific statutory requirements of the deductions they claim.
With one exception, all of the checks that Mr. Davis made out to "Universal Life Church" were deposited into the Universal Life Church accounts over which Mrs. Davis had the sole signatory power. In one instance, Mrs. Davis negotiated the check from Mr. Davis and purchased a cashier's check. There is absolutely nothing in the record to support petitioners' argument on brief that Mrs. Davis was signatory on the Universal Life Church accounts only in a fiduciary capacity. As to*38 the one "contribution" not cycled through Mrs. Davis' two Universal Life Church checking accounts, the record does not indicate to whom the cashier's check was made out, nor does the record establish what became of that cashier's check. In the absence of any evidence to that effect, we cannot assume and will not infer that the cashier's check ended up in the hands of ULC Modesto.
Petitioners called as a witness Kirby J. Hensley, the president of ULC Modesto, who testified in broad generalities and conclusory terms that ULC Modesto "controlled" Mrs. Davis' two Universal Life Church accounts. Hensley's sweeping testimony that every ULC chapter is part of ULC Modesto was simply an erroneous legal conclusion on his part that the exemption of ULC Modesto is a group exemption. That is not the case. See note 9. Moreover, Hensley also testified that ULC Modesto left it up to local congregations or chapters to determine the manner in which funds would be raised and spent, "as long as it's done for the right thing," and under the church's doctrine, as described by Hensley, each member determines for himself or herself what is "right." We found Hensley to be an evasive, argumentative witness*39 whose testimony is wholly unworthy of belief. We simply did not find credible Hensley's testimony that as president of ULC Modesto, he "controlled" every ULC congregation in America and in the world. Petitioners have failed to prove that they made
Petitioners do not seriously argue that they are entitled to deductions for charitable contributions to their own Universal Life Church "congregation" or chapter, and for good reason. *817 Petitioners have failed to meet virtually every test of
*40 First, Mrs. Davis' dominion and control over her Universal Life Church checking accounts preclude a finding that there have been any charitable contributions by Mr. Davis or anyone else. The term "charitable contribution" as it is used generally in
Second, the only documents pertaining to petitioners' Universal Life Church "congregation" or chapter are the "charter" and Mrs. Davis' two "degrees." There is no documentary or other evidence regarding the organization and operation of their chapter or of the distribution of its assets upon dissolution. See
*818 Finally, the record overwhelmingly establishes that the net earnings of petitioners' Universal Life Church "congregation" or chapter inured to their benefit.
We are not, as petitioners suggest, ruling upon ULC Modesto's tax exemption. We simply hold that petitioners have failed to prove they made any contributions to ULC Modesto. Petitioners*43 also argue that by denying their deduction for charitable contributions, we are discriminating against them and their church on the basis of their religious beliefs, in violation of their
At trial, we granted respondent's motion for increased deficiencies for 1978 and 1979, based on unreported interest and dividend income. *44 Respondent bears the burden of proof on this new matter.
The parties stipulated to the existence of petitioners' account at the Alaska Teamsters Federal Credit Union and to Mr. Davis' brokerage account at Dean Witter Reynolds Inc. The stipulated joint exhibits report interest and dividend income earned in those accounts, and representatives from both institutions confirmed this. Both accounts were in Mr. Davis' individual name. Petitioners' returns for 1978 and 1979 reported no interest or dividend income. Accordingly, respondent has established unreported income by petitioners. Petitioners' self-serving and wholly unsubstantiated testimony that they opened these accounts as agents or nominees for ULC Modesto or for their own Universal Life Church chapter is not credible. Respondent has carried his burden with respect to these two items.
With respect to the interest earned on one of the certificates of deposit at Arctic First National Savings & Loan Association, the funds in the account that earned interest were traceable to one of the ULC accounts over which Mrs. Davis had sole signatory power. Mrs. Davis also had signatory authority over that certificate of deposit*45 acccount. While respondent did not produce the signature card for this account to show that Mrs. Davis was the
Thus, we hold that respondent has carried his burden of proof as to the unreported interest and dividend income for 1978 and 1979.
Respondent determined that petitioners were liable for an addition *46 to tax under
Respondent also determined that petitioners were liable for the
Petitioners' unexplained omission of interest and dividend income for 1978 and 1979 alone justifies negligence additions for those years. See
*49 Accordingly, to reflect our holdings,
1. Unless otherwise indicated, all section references are to the Internal Revenue Code of 1954 as amended and in effect during the taxable years in question, and all references to Rules are to the Tax Court Rules of Practice and Procedure.↩
2. In the statutory notice, this addition was mislabeled in one place as the
3. Only partial bank records of the two Universal Life Church accounts were submitted in evidence, but even from these incomplete records, the pattern of use of the Universal Life Church accounts for petitioners' personal expenditures in all 4 years was clearly established.↩
4. The parties appear to agree that these "dividends" do not qualify for the dividend exclusion. See sec. 116 as in effect during 1979.↩
5. The charitable contributions deductions claimed on the tax returns were in lesser amounts than the amounts Mr. Davis paid into Mrs. Davis' Universal Life Church accounts, because of the percentage limitation on contributions by individual taxpayers.
6. Bank Secrecy Act of 1970, Pub. L. 91-508, 84 Stat. 1114, codified at
7.
The following are not excluded by the hearsay rule, even though the declarant is available as a witness:
* * * *
(6)
8. See also
9. We have so held in numerous Memorandum Opinions. See
10. As in effect during the years in question,
* * * * (2) A corporation, trust, or community chest, fund, or foundation -- (A) created or organized in the United States or in any possession thereof, or under the law of the United States, any State, the District of Columbia, or any possession of the United States; (B) organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals; (C) no part of the net earnings of which inures to the benefit of any private shareholder or individual; * * *↩
11. See
12. See
13. Compare
United States of America and Anthony Carsanaro, Revenue ... , 613 F.2d 316 ( 1979 )
Lilley Capodanno v. Commissioner of Internal Revenue, R. T. ... , 602 F.2d 64 ( 1979 )
Bubbling Well Church of Universal Love, Inc. v. ... , 670 F.2d 104 ( 1981 )
Donald John Rechtzigel v. Commissioner of Internal Revenue , 703 F.2d 1063 ( 1983 )
United States of America and John Dezelar v. David L. ... , 614 F.2d 985 ( 1980 )
Little v. Helvering , 75 F.2d 436 ( 1935 )
New Colonial Ice Co. v. Helvering , 54 S. Ct. 788 ( 1934 )
William H. And Avilda L. Edwards v. Commissioner of ... , 680 F.2d 1268 ( 1982 )
Norman E. McCoy and Mary Louise McCoy v. Commissioner of ... , 696 F.2d 1234 ( 1983 )
Harold Dejong and Marjorie J. Dejong v. Commissioner of ... , 309 F.2d 373 ( 1962 )
United States v. Robert Neff , 615 F.2d 1235 ( 1980 )
Welch v. Helvering , 54 S. Ct. 8 ( 1933 )
United States v. Lee , 102 S. Ct. 1051 ( 1982 )
Universal Life Church, Inc. v. United States , 372 F. Supp. 770 ( 1974 )
dr-c-edgar-mason-and-karen-l-mason-individually-and-dr-c-edgar , 851 F.2d 47 ( 1988 )
MacKlem v. United States , 757 F. Supp. 6 ( 1991 )
Morris v. United States , 616 F. Supp. 246 ( 1985 )
Le Beau v. Comm'r , 108 T.C.M. 343 ( 2014 )
Estate of Hinz v. Commissioner , 79 T.C.M. 53707 ( 2000 )
Palmer v. Commissioner , 74 T.C.M. 887 ( 1997 )
Johnson v. Commissioner , 78 T.C.M. 468 ( 1999 )
HORN v. COMMISSIONER , 84 T.C.M. 204 ( 2002 )
Prowse v. Comm'r , 2007 Tax Ct. Summary LEXIS 31 ( 2007 )
Graham v. Comm'r , 89 T.C.M. 981 ( 2005 )
Healey v. Commissioner , 71 T.C.M. 3148 ( 1996 )
Ward v. Comm'r , 105 T.C.M. 1792 ( 2013 )
SMITH v. COMMISSIONER , 2003 Tax Ct. Summary LEXIS 16 ( 2003 )
Taylor v. Commissioner , 79 T.C.M. 1364 ( 2000 )
TRIPLETT v. COMMISSIONER , 2005 Tax Ct. Summary LEXIS 166 ( 2005 )
Griggs v. Comm'r , 2007 Tax Ct. Summary LEXIS 2 ( 2007 )
Knowles v. Comm'r , 114 T.C.M. 169 ( 2017 )
Kuretski v. Comm'r , 104 T.C.M. 295 ( 2012 )
Tabbi v. Commissioner , 70 T.C.M. 836 ( 1995 )