                            T.C. Summary Opinion 2016-69



                            UNITED STATES TAX COURT



          JOSEPH L. JACKSON AND SYLVIA A. JACKSON, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 2034-15S.                             Filed October 24, 2016.



      Joseph L. Jackson and Sylvia A. Jackson, pro sese.

      Anne M. Craig and Lauren B. Epstein, for respondent.



                                 SUMMARY OPINION


      GUY, Special Trial Judge: This case was heard pursuant to the provisions

of section 7463 of the Internal Revenue Code in effect when the petition was

filed.1 Pursuant to section 7463(b), the decision to be entered is not reviewable by


      1
          Unless otherwise indicated, all section references are to the Internal
                                                                           (continued...)
                                         -2-

any other court, and this opinion shall not be treated as precedent for any other

case.

        Respondent determined a deficiency of $4,050 in petitioners’ Federal

income tax for 2012. Petitioners, husband and wife, filed a timely petition for

redetermination with the Court pursuant to section 6213(a). At the time the

petition was filed, petitioners resided in Florida.

        After concessions,2 the issue remaining for decision is whether Mr. Jackson

received taxable nonemployee compensation of $4,815 in 2012.

                                     Background

        Some of the facts have been stipulated and are so found. The stipulation of

facts, the first supplemental stipulation of facts, and the accompanying exhibits are

incorporated herein by this reference.

        In 2012 Mr. Jackson was the pastor, a director, and the registered agent for

Triumph Church of God (church). Mrs. Jackson was also a church director. The


        1
        (...continued)
Revenue Code (Code), as amended and in effect for 2012, and all Rule references
are to the Tax Court Rules of Practice and Procedure. Monetary amounts are
rounded to the nearest dollar.
        2
       The parties agree that Mrs. Jackson failed to report wages of $16,527 that
she earned in 2012 and that she had Federal income tax withholding of $1,294.
Other adjustments are computational and will be resolved in the parties’
computations under Rule 155.
                                         -3-

church had approximately 25 to 30 active members and as many as seven ministers

and offered services three days each week. Mr. Jackson had informed the church’s

board of directors that he did not want to be paid a salary for his pastoral services

but that he would not be opposed to receiving “love offerings”, gifts, or loans from

the church.3

      Petitioners managed the church’s checking account, and it appears that they

jointly signed all of the church’s checks. Petitioners signed numerous checks in

2012, made payable to Mr. Jackson, with handwritten notations such as “Love

Offering” or “Love Gift” on the memo line.4

      Kathy Simmons had been the church’s bookkeeper from 1993 to 2015. In

2012 she prepared and sent to Mr. Jackson a Form 1099-MISC, Miscellaneous

Income, reporting that he had received nonemployee compensation of $4,815 from

the church. When Ms. Simmons left the church in late 2015, petitioners’ daughter,

Renece Jackson Griggs, replaced Ms. Simmons as the church’s bookkeeper.



      3
      For a discussion of the meaning of the term “love offering”, see Michael P.
Mosher & Ryan K. Oberly, “A Gift Not So Simple--Current Tax Issues Associated
With ‘Love Offerings’”, 24 Tax’n of Exempts 28 (July/Aug. 2012). For present
purposes, we understand that petitioners consider the term to be synonymous with
“nontaxable gift”.
      4
     The record reflects that the church transferred “love offerings” to other
members of the church, including Mrs. Jackson.
                                         -4-

      Petitioners filed a joint Federal income tax return for 2012, claiming a

deduction for a charitable contribution of $6,478 to the church.5 They did not,

however, include as an item of income the $4,815 of nonemployee compensation

reported on Form 1099-MISC. Although petitioners do not dispute that Mr.

Jackson received $4,815 from the church, they assert that the amounts transferred

to him were improperly reported as nonemployee compensation. Mr. Jackson

testified that he contacted Ms. Simmons and requested that she retract the Form

1099-MISC or issue a corrected one, but the process was never completed. Ms.

Simmons was not called as a witness. Petitioners contend that the amounts that

they received from the church represent nontaxable “love offerings”, gifts, or

loans.6




      5
          Respondent does not challenge this deduction.
      6
         Renece Jackson Griggs, petitioners’ daughter, testified that some of the
amounts that the church transferred to Mr. Jackson were loans that he could repay
at his discretion. Although the Court left the record open for a short period of time
after trial to allow petitioners to produce additional documents and records in
support of their case, petitioners offered no objective evidence, such as bank
records or a promissory note, showing that the church made any loans to Mr.
Jackson. Under the circumstances, we consider petitioners to have abandoned this
argument.
                                        -5-

                                    Discussion

      The Commissioner’s determination of a taxpayer’s liability in a notice of

deficiency normally is presumed correct, and the taxpayer bears the burden of

proving that the determination is incorrect. Rule 142(a); Welch v. Helvering, 290

U.S. 111, 115 (1933). Petitioners do not contend and the record does not establish

that the burden of proof shifts to respondent under section 7491(a) as to any issue

of fact. Moreover, respondent satisfied the provisions of section 6201(d) by

presenting reasonable and probative information as to the character of the income

in question in addition to the Form 1099-MISC.

      The parties stipulated that Mr. Jackson received $4,815 from the church and

that the church (through Ms. Simmons) characterized that amount as nonemployee

compensation for tax purposes. Thus, petitioners must show the nontaxable

character of the payment. See Tokarski v. Commissioner, 87 T.C. 74, 76-77

(1986) (holding that the taxpayer had the burden of proof to show the nontaxable

nature of a payment where the taxpayer indisputably received the income in issue);

Chai v. Commissioner, T.C. Memo. 2015-42.

      Congress has defined “gross income” broadly in the Code. Section 61(a)(1)

provides the general rule that, except as otherwise provided in subtitle A of the

Code, gross income means all income from whatever source derived, including
                                         -6-

compensation for services. See Commissioner v. Duberstein, 363 U.S. 278

(1960); Old Colony Tr. Co. v. Commissioner, 279 U.S. 716 (1929).

      Section 102 provides that gross income does not include amounts acquired

by gift. Whether a payment is a gift under section 102(a) or gross income under

section 61(a) is a factual question.7 See Banks v. Commissioner, T.C. Memo.

1991-641.

      In Commissioner v. Duberstein, 363 U.S. at 284-285, the Supreme Court

stated that the problem of distinguishing gifts from taxable income “does not lend

itself to any more definitive statement that would produce a talisman for the

solution of concrete cases.” The Supreme Court concluded that, in cases such as

this one, the transferor’s intention is the most critical consideration, and there must

be an objective inquiry into the transferor’s intent. Id. at 285-286. In other words,

rather than relying on a taxpayer’s subjective characterization of the transfers, a

court must focus on the objective facts and circumstances. Id. at 286.

      The record shows that the transfers were made to compensate Mr. Jackson

for his services as pastor. See Banks v. Commissioner, T.C. Memo. 1991-641. As


      7
       We note that sec. 102(c) provides the general rule that subsec. (a) “shall not
exclude from gross income any amount transferred by or for an employer to, or for
the benefit of, an employee.” Respondent does not contend, however, that Mr.
Jackson was an employee of the church.
                                         -7-

Mr. Jackson candidly explained at trial, he had informed the board of directors that

he would accept “love offerings” and gifts as substitutes for a salary. Ms.

Simmons, the church’s bookkeeper at the time, considered the payments to be

compensation as is reflected in the Form 1099-MISC that she issued to Mr.

Jackson. In the light of these facts, petitioners’ subjective characterization of the

transfers as nontaxable “love offerings” and “love gifts” is misguided.

      Petitioners did not offer the testimony of any members of the congregation

(including the other directors) or Ms. Simmons that would allow the Court to

conclude that the transfers were anything other than compensation for services.

The frequency of the transfers and the fact that they purport to have been made on

behalf of the entire congregation is further objective evidence that the transfers

represented a form of compensation. See Goodwin v. United States, 67 F.3d 149,

152-153 (8th Cir. 1995) (holding that substantial, ongoing cash payments

collected from church congregation and transferred to pastor as “special occasion

gifts” constitute taxable income).

      In conclusion, we hold that the amounts that Mr. Jackson received from the

church in 2012 represented compensation for services and, thus, constituted

taxable income to him under section 61(a)(1).
                             -8-

To reflect the foregoing,


                                   Decision will be entered

                            under Rule 155.
