Rev. Rul. 62-113

Advice has been requested as to the treatment, for Federal income tax purposes, of (1) payments made to a missionary from a church fund as reimbursement for travel and living expenses incurred away from home in the service of the church, (2) contributions to the fund by the parent of the missionary, and (3) direct payments by the parent for the support of the missionary.

In the instant case, the work of the local congregation in the field of missions is carried on by missionaries who are specially called from the congregation to devote their full time to missionary service for a period of specified duration and who are ordained for this purpose. The congregation has a number of missionaries presently serving missions in various parts of the world on a voluntary, noncompensated basis. Some of these missionaries are supported in whole or in part by their parents, some pay their expenses from their personal savings, and some have their traveling and living expenses entirely or partially reimbursed or paid from a church fund maintained for that purpose.

The local congregation, through the contributions of its members, maintains the fund and members are encouraged to make personal contributions to the fund. All contributions to the fund are expended in pursuance of the purposes of the fund and no part thereof is earmarked for any individual.

From this fund, missionaries are reimbursed for certain qualified living and traveling expenses incurred in the service of the church where such expenses are not covered by amounts received by the missionaries directly from their parents, from relatives or friends, or from their own savings. In order to justify reimbursement for his expenses, each missionary is required to submit a monthly report listing his receipts and expenses and in no case is the fund to supply amounts greater than the reports can validate.

The taxpayer's son is one of the missionaries from the local congregation. The son is not married and has no income or means of support except for (1) amounts provided by the taxpayer and (2) the reimbursements of living and traveling expenses made to him by the church from the fund. More than one-half of the son's total support for the calendar year was provided by payments made by the taxpayer directly to him. Although the taxpayer made contributions to the church fund after the son became a missionary, he had done so over a period of years before his son's departure for the mission and he contemplates continuing to do so.

Question 1 . Are amounts paid by the fund to reimburse the missionary for expenses incurred away from home in the service of the church required to be included in the gross income of the missionary?

Answer . Section 61 of the Internal Revenue Code of 1954 and section 1.61-1 of the Income Tax Regulations provide, generally, that gross income includes all income from whatever source derived unless excluded by law.

In the instant case, the missionary is motivated by religious conviction and a desire to donate services to his church. He is engaged in rendering gratuitous services to his church. Under these circumstances, reimbursement by the church to the missionary, or the direct payment by the church, of any of the expenses involved does not constitute income to the missionary but represents the repayment by the church of advances made by the missionary on behalf of, and at the request of, the church. Accordingly, such amounts are not includible in the missionary's gross income for Federal income tax purposes. See Revenue Ruling 57-60, C.B. 1957-1, 25, as modified by Revenue Ruling 60-280, C.B. 1960-2, 12.

Question 2 . Are monies contributed by the taxpayer to the fund established by the local congregation deductible as charitable contributions?

Answer . Section 170 of the Code provides for the deduction, in computing taxable income, of charitable contributions, the payment of which is made within the taxable year to certain organizations described therein. Section 262 of the Code provides, generally, that no deduction shall be allowed for personal, living, or family expenses.

If contributions to the fund are earmarked by the donor for a particular individual, they are treated, in effect, as being gifts to the designated individual and are not deductible. However, a deduction will be allowable where it is established that a gift is intended by a donor for the use of the organization and not as a gift to an individual.

The test in each case is whether the organization has full control of the donated funds, and discretion as to their use, so as to insure that they will be used to carry out its functions and purposes.

In the instant case, the son's receipt of reimbursements from the fund is alone insufficient to require a holding that this test is not met. Accordingly, unless the taxpayer's contributions to the fund are distinctly marked by him so that they may be used only for his son or are received by the fund pursuant to a commitment or understanding that they will be so used, they may be deducted by the taxpayer in computing his taxable income in the manner and to the extent provided by section 170 of the Code.

Question 3 . May the taxpayer claim a personal exemption deduction for his missionary son?

Answer . Section 151(e) of the Code provides, in general, with certain exceptions relating to children who have not attained the age of 19 and are students, that a taxpayer may claim an exemption of $600 for each dependent (as defined in section 152 of the Code) whose gross income for the calendar year in which the taxable year of the taxpayer begins is less than $600; but, the exemption shall not be allowed for any dependent who has made a joint return with his spouse for the taxable year beginning in the calendar year in which the taxable year of the taxpayer begins. The term `dependent' as defined in section 152 of the Code includes a son of a taxpayer who, for the calendar year in which the taxable year of the taxpayer begins, received over half of his support from the taxpayer.

Since the reimbursements from the fund are not includible in the missionary's gross income, his gross income for the calendar year is less than $600. Accordingly since the amounts furnished by the taxpayer directly to his son and used for his support constitute more than one-half of his total support for the calendar year, the taxpayer is entitled to a dependency exemption for his son.