Davis v. United States, 495 U.S. 472 (1990)

Davis v. United States

No. 89-98

Argued March 26, 1990
Decided May 21, 1990
495 U.S. 472

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

Syllabus

Section 170 of the Internal Revenue Code of 1954 permits a taxpayer to claim a charitable contribution deduction only if the contribution is made "to or for the use of" a qualified organization. Petitioner husband and wife, who are members of the Church of Jesus Christ of Latter-day Saints (Church), claimed such deductions for funds transferred to their sons while they were serving as full-time, unpaid missionaries for the Church. The Church requested the payments, set their amounts, and, through written guidelines, instructed that they be used exclusively for missionary work. In accordance with the guidelines, petitioners’ sons used the money primarily to pay for rent, food, transportation, and personal needs while on their missions. When the Internal Revenue Service denied petitioners’ claim, they filed suit in the District Court. The court ruled in favor of the Government, holding that the payments were not "for the use of " the Church under § 170 because the Church lacked sufficient possession and control of the funds. The court also rejected petitioners’ alternative claim that the payments were deductible under Treas.Reg. 1.170 A-1(g) -- which allows the deduction of "unreimbursed expenditures made incident to the rendition of services to an organization contributions to which are deductible" -- on the ground that petitioners were not themselves performing donated services. The Court of Appeals affirmed.

Held:

1. The funds transferred by petitioners to their sons were not donated "for the use of " the Church within the meaning of § 170. Pp. 478-486.

(a) In choosing the phrase "for the use of," Congress was most likely referring to donations made to a legally enforceable trust or a similar legal arrangement. Although, on its face, the quoted phrase could support any number of meanings, the history of the statute indicates that Congress added the phrase to § 170 in 1921 for the purpose of overruling the Government’s prior interpretation that a gift to a trust for a charitable purpose was not deductible. Construing the phrase as referring to a trust or similar arrangement comports with the accepted meaning in 1921 of "use" as synonymous with the term "trust." Pp. 479-482.

(b) Thus, the Service’s contemporaneous and longstanding interpretation that the phrase "for the use of" is intended to convey a similar meaning as "in trust for" is consistent with the statutory language, fully implements Congress’ apparent purpose in adopting it, and must be accepted. Pp. 482-484.

(c) There is no evidence to support petitioners’ contentions that Congress intended the phrase "for the use of " to be interpreted as referring to fiduciary relationships in general or as referring to a type of relationship that gives a qualified organization a reasonable ability to supervise the use of contributed funds. Pp. 484-485.

(d) The record does not support a finding that petitioners transferred the funds to their sons "in trust for," or through a similarly enforceable legal arrangement for the benefit of, the Church. There is no evidence that petitioners took any steps normally associated with creating a trust or similar legal arrangement; that the sons had any legal obligation to comply with their promise to use the money in accordance with the Church’s guidelines; or that the Church might have a legal entitlement to the money or to a civil cause of action against missionaries using such money for purposes not approved by the Church. Pp. 485-486.

2. The transfer of funds by petitioners to their sons was not a contribution "to" the Church under Treas.Reg. 1.170 A-1(g). The regulation’s plain language indicates that taxpayers may claim deductions only for "unreimbursed expenditures" incurred in connection with their own "rendition of services to [a qualified] organization." Pp. 486-489.

861 F.2d 558, affirmed.

O’CONNOR, J., delivered the opinion for a unanimous Court.