Gardner v. Commissioner of Internal Revenue, No. 13-72699 (9th Cir. 2017)
Annotate this CaseTaxpayers argue that they did not earn taxable income and are exempt from paying taxes because they have taken vows of poverty. The Bethal Aram Ministries (BAM) is a church formed by taxpayers that provides maintenance to taxpayers. The court concluded that the tax court's determinations are supported by substantial evidence. In this case, the payments were quid pro quo payments for services in setting up corporations sole and limited liability companies and not contributions to BAM. Furthermore, taxpayers have complete dominion and control over BAM and its accounts. Accordingly, the court affirmed the tax court's decision that payments received by taxpayers are taxable and that they are subject to self-employment tax.
Court Description: Tax. The panel affirmed the Tax Court’s decision denying a petition for redetermination of federal income tax deficiencies that challenged the taxability of alleged maintenance payments received by taxpayers who have taken vows of poverty. Taxpayers contended that they did not earn taxable income and are exempt from paying taxes because they have taken vows of poverty. They explained that their maintenance is provided by Bethel Aram Ministries (BAM), a church for which taxpayer Elizabeth Gardner is its corporation sole. The panel explained that substantial evidence supports the Tax Court’s determinations that the payments taxpayers received were not contributions to BAM but were instead quid pro quo payments for taxpayers’ services (in setting up corporations sole and LLCs), and that taxpayers retained complete dominion and control over the payments even after they were deposited in BAM’s accounts. Accordingly, the payments to taxpayers are taxable and subject to self-employment tax. GARDNER V. CIR 3
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