UNITED STATES TAX COURT

CLC

135 T.C. No.

27

UNITED STATES TAX COURT

PHILIP A. DRISCOLL AND LYNNE B. DRISCOLL, a.k.a. DONNA L.

DRISCOLL, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No.

1070-07.

Filed December 14,

2010.

During each of the years at'issue, an organization

exempt from tax under sec. 501(a), I.R.C., paid to

petitioner husband, an ordained minister, a so-called

parsonage allowance that he used to provide a principal

home and a second home.

For each of their taxable years at issue, petitioners (Ps) excluded from gross income under sec. 107,

I.R.C., the parsonage allowance. R determined to

include in Ps' gross income for each of those years the

portion of that allowance with respect to a second

home.

Held:

Ps are entitled to exclude from gross

income under sec. 107, I.R.C., the portion of the

parsonage allowance with respect to a second home.

SERVED Dec 14 2010

- 2 Paula M. Junghans, for petitioners.

Eric B. Jorgensen, for respondent.

OPINION

CHIECHI, Judge:

Respondent determined the following defi-

ciencies in, and fraud penalties under section 6663(a)1 on,

petitioners' Federal income tax (tax):

Fraud.Penalty

Under Sec. 6663(a)

Year

Deficiency

1996

1997

$64,905

83,512

$48,678.75

62,634.00

1998

1999

107,562

149,880

80,671.59

112,410.00

The only issue remaining for decision is whether petitioners

are entitled for each of their taxable years 1996 through 1999 to

exclude from gross income under section 107 the amount that an

organization exempt from tax under section 501(a) paid to petitioner Philip A. Driscoll during each of those years with respect

to a second home that petitioners owned.

We hold that they are.

Background

All of the facts in this case, which the parties submitted

under Rule 122, have been stipulated by the parties and are so

found.

Unless otherwise indicated, all section references are to

the Internal Revenue Code (Code) in effect for the years at

issue. All Rule references are to the Tax Court Rules of

Practice and Procedure.

- 3

-

Petitioners resided in Georgia at the time they filed the

petition in this case.

During each of the years 1996 through 1999, petitioner

Philip A. Driscoll

(Mr. Driscoll) was an ordained minister who

worked for Mighty Horn Ministries, Inc., later known as Phil

Driscoll Ministries,

Inc.

(We shall refer to Mighty Horn Minis-

tries, Inc., later known as Phil Driscoll Ministries, Inc., as

the Ministries.)

During each of those years, the Ministries was

an organization.described in section 501(c) (3)

and exempt from

tax -under section 501(a).

During each of the years 1996 through 1999, petitioners

owned more than one residence or home; they owned a principal

residence or home in Cleveland, Tennessee (Cleveland home), and a

second residence or home at the Parksville Lake Summer Home area

of the Cherokee National Forest in Lake Ocoee (lake second home),

near Cleveland, Tennessee.

Petitioners owned one lake second

home from January 1996 through April 1998, which they sold in

April 1998, and another lake second home from April 1998 through

1999.2

During the years 1996 through 1999, petitioners used their

Cleveland home solely as a residence and their lake second home

solely as a residence.

At no time during those years did peti-

2Petitioners thus owned two second homes at different times

during 1998.

That fact is not material to our resolution of the

issue presented.

For convenience, we shall refer herein in the

singular to a lake second home or petitioners' lake second home

even when discussing 1998.

- 4 -

tioners use their Cleveland home or their lake second home for

any commercial purposes, such as rental purposes.

For each of the years at issue, the Ministries filed Form

990, Return of Organization Exempt From Income Tax,

claimed an amount described as "parsonage allowance"

parsonage allowance).

in which it

(Ministries

That amount represented the total amount

that the Ministries paid during each of those years with respect

to petitioners' Cleveland home and their lake second home for the

acquisition and maintenance of those homes,

payments, utilities,

furnishings,

including mortgage

improvements, and maintenance,

such as lawn care, painting, and repairs.

In the tax return that petitioners filed for each of the

years 1996 through 1999, they did not include the Ministries

parsonage allowance in gross income.

Respondent issued a notice of deficiency (notice) to petitioners for their taxable years 1996 through 1999.

In that

notice, respondent determined, inter alia, that petitioners are

not entitled for any of those years to exclude from gross income

under section 107 the portion of the Ministries parsonage allow-

ance that the Ministries paid during each of those years with

respect to petitioners'

lake second home.3

As a result, respon-

3Respondent did not determine to include in gross income for

any of petitioners' taxable years 1996 through 1999 the portion

of the Ministries parsonage allowance that the Ministries paid

during each of those years with respect to petitioners' Cleveland

(continued...)

dent further determined in the notice to include the following

amounts in petitioners' gross income for the years indicated:

Year

1996

1997

1998

Portion of Ministries

Parsonage Allowance With

Respect to Lake Second Home

$25,842.53

70,707.50

116,309.11

1999

195,778.52

Discussion

Petitioners bear the burden of proving that the determinations in the notice that remain at issue are erroneous.

142(a); Welch v. Helvering, 290 U.S.

111,

115

(1933).

See Rule

That the

parties submitted this case fully stipulated does not change that

burden or the effect of a failure of proof.

Borchers v.

22

(8th Cir.

Commissioner,

95 T.C.

82,

91

See Rule 122 (b);

(1990), affd.

943- F.2d

1991).

We must decide an issue of first impression, namely, whether

petitioners are entitled for each of the years at issue to ex|

3(...continued)

home. As a result, respondent did not determine to include the

following amounts in petitioners' gross income for the years

indicated:

Year

1996

1997

1998

1999

Portion of Ministries

Parsonage Allowance With

Respect to Cleveland Home

$78,469

42,708

71,704

87,254

-

6 -

clude from gross income under section 107 the portion of the

Ministries parsonage allowance that the Ministries paid to Mr.

Driscoll during each of those years with respect to a second home

of petitioners

(i.e., their lake second home).

Section 107 provides:

SEC.

10·/.

RENTAL VALUE OF PAKSUNAGES.

In the case of a minister of the gospel, gross income

does not include-(1) the rental value of a home furnished to him as

part of his compensation; or

(2) the rental allowance paid to him as part of

his compensation, to the extent used by him to rent or

provide a home.

In support of their position that they are entitled for each

of the years at issue to exclude from gross income under section

107 the portion of the Ministries parsonage allowance with respect to their lake second home, petitioners argue:

The only limitation expressed by Congress in section

107 was that amounts excluded from gross income under

Section 107 be used to provide a property used as a

dwelling place by the minister.

Respondent has stipulated that the properties at issue (i.e., the second

homes of petitioners) in each year in this case were so

used, and that the amounts in issue were expended in

connection with the acquisition and maintenance of

those properties. Accordingly, there is no basis under

the statute to require Petitioners to include the

amounts related to the second homes in their gross

income.

In support of respondent's position that petitioners are not

entitled for each of the years at issue to exclude from gross

income under section 107 the portion of the Ministries parsonage

- 7 -

allowance with respect to their lake second home, respondent

argues that section 107

allowed"E a minister one parsonage allowance for a

home.

I.R.C. § 107 does not allow a minister a second

parsonage allowance for any additional homes. * * *

An exclusion from gross income first appeared in section

213(b) (11)

of the Revenue Act of 1921, ch.

136, 42 Stat. 239,

for

the "rental value of a dwelling house and appurtenances thereof

furnished to a minister of the gospel as part of his compensation".

As respondent concedes, the rationale for the exclusion

from gross income in section 213(b) (11) of the Revenue Act of

1921 of the so-called parsonage allowances is "obscure".6

The

4Respondent uses the past tense in describing sec. 107

because, effective for taxable years after the taxable years at

issue, Congress amended sec. 107(2) by limiting the rental

allowance excludible under that section to an amount not exceeding the fair rental value of a home of a minister.

Congress

appears to have made that amendment in response to the Court's

holding in Warren v. Commissioner, 114 T.C. 343 '(2000).

See

infra note 16.

sFor convenience, we shall sometimes refer to the allowance

that is, or was, excludible from gross income under sec. 107 and

its predecessors as the excludible parsonage allowance.

'According to respondent,

The Senate Committee Report does not mention the provision [sec. 213 (b) (11) of the Revenue Act of 1921], and

the House Conference Report indicates only that the

House accepted the Senate version with an amendment

making an unspecified "clerical change." See S. Rep.

No. 275 at 14

(1921); H.R. Conf. Rep. No. 486 at 23

(1921).

One commentator has suggested that the in-kind

exclusion grew out of "the general respect held by

Congress and the public for churches," as well as

(continued...)

- 8 -

identical provision appeared in, inter alia, section 22 (b) (8) of

the Revenue Act of 1928,

ch.

of the Revenue Act of 1932,

22 (b) (6)

852,

45 Stat.

798,

section 22(b) (6)

ch. 209, e47 Stat. 179, and section

of the Internal Revenue Code of 1939, ch. 2, 53 Stat.

10.

Congress reenacted as section 107(1) of the Internal Revenue

Code of 1954 (1954 Code) the excludible parsonage allowance as it

appeared in the tax law before Congress enacted that Code, except

Congress changed the phrase "a dwelling house and appurtenances

thereof" to the phrase "a home".

ch. 736,

68A Stat.

32.

Internal Revenue Code of 1954,

In changing the phrase "a dwelling house

and appurtenances thereof" to the phrase "a home",

Congress did

not intend any change in the law.7

'(...continued)

"Congress's tendency to benefit favored entities."

* * * In 1921, there was no generally available exclusion for employer-provided housing, and a minister

receiving housing from his current church clearly would

not have been eligible for the deduction under Section

214(a) of the 1921 Revenue Act for traveling expenses,

including lodging, "while away from home in the pursuit

of a trade or business."

42 Stat. at 239.

7When it enacted sec. 107, Congress stated in pertinent

part:

The word "home" as used in both paragraphs [sec.

107(1) and (2)] is not intended to change the law under

section 22(b)(6) of the code [sic] of 1939 which used

the term "dwelling house and appurtenances thereof."

H. Rept. 1337, 83d Cong., 2d Sess. A35

Cong., 2d Sess. 186 (1954).

(1954); S. Rept.

1622, 83d

-

9 -

When Congress enacted the 1954 Code, it also expanded the

excludible parsonage allowance :ba section 107(2) of that Code to

include the payment of a "rental allowance paid to him [the

minister] as part of his compensation, to the extent used by him

to rent or provide a home."

Id.

Congress expanded the

excludible parsonage allowance in section 107(2) of the 1954 Code

to remove "the discrimination in existing law by providing that

the present exclusion is to apply to rental allowances paid to

ministers to the extent used by them to rent or provide a home.""

H. Rept.

Cong.,

1337,

2d Sess.

83d Cong., 2d Sess. 15

16

(1954); S. Rept.

1622,

83d

(1954).

In expanding the excludible parsonage allowance in section

107(2) of the 1954 Code in order to exclude a rental allowance

paid to a minister as part of his compensation, Congress wanted

to ensure that the term "home" did not extend to a situation

where a minister, in addition to a home, rents, purchases, or

owns a farm or other business property.

To accomplish that

"Congress described "the discrimination in existing law" as

follows:

Under present law, the rental value of a home

furnished a minister of the gospel as a part of his

salary is not included in his gross income.

This is

unfair to those ministers who are not furnished a

parsonage, but who receive larger salaries (which are

taxable) to compensate them for expenses they incur in

supplying their own home.

H. Rept. 1337, supra at 15; S. Rept. 1622, supra at 16.

-

10

-

objective, Congress added at the end of section 107(2) the phrase

"to the extent used by him to rent or provide a home."9

That

phrase precludes the exclusion from gross income of any portion

of a rental allowance paid to a minister that is expended in

connection with a farm or other business property.

See sec.

1.107-1(c), Income Tax Regs.1°

Respondent acknowledges that petitioners' second residence

in Lake Ocoee is a home of petitioners, albeit a second home.'

'Congress explained the phrase "to the extent used by him to

rent or provide a home" that it added at the end of sec. 107(2)

as follows:

The term "home" includes the case where furnishings are

also included.

It does not cover cases where a

minister, in addition to the home, rents a farm or

business property, except to the extent that the total

rental paid can be allocated to the home itself and the

necessary appurtenances thereto, such as a garage.

H. Rept. 1337,

supra at A35; S. Rept. 1662,

supra at 186.

°Sec. 1.107-1(c), Income Tax Regs., provides in pertinent

part:

Where the minister rents, purchases, or owns a farm or

other business property in addition to a home, the

portion of the rental allowance expended in connection

with the farm or business property shall not be

excluded from his gross income.

"Respondent acknowledges throughout respondent' s briefs

that petitioners' residence in Lake Ocoee is a home of Mr.

Driscoll, albeit a second home, since he had another home or

residence, i.e., his principal home or residence, in Cleveland,

Tennessee.. For example, respondent asserts on brief :

petitioners are not entitled to exclude from income on

their federal income tax returns as a parsonage

(continued. . .)

- 11 -

Nonetheless, respondent argues that the Ministries'parsonage

allowance with-respect to that home is not-excludible under

section 107.

That is because, according to respondent, section

107, which uses the phrase "a home", and its legislative history"

"(...continued)

allowance amounts paid to or on behalf of Driscoll by

Ministries for any second homes, "lake houses" on Lake

Ocoee, during their taxable years 1996, 1997, 1998, and

1999 under I.R.C.

*

*

§ 107.

*

. *

*

*

.

*

Under I.R.C. § 107, Driscoll, as an ordained

minister, is not entitled to exclude from income as a

parsonage allowance amounts paid by Ministries for his

second homes, "lake houses," on Lake Ocoee, during the

petitioners' taxable years 1996, 1997, 1998, and 1999.

*

*

*

*

*

*

*

* * * petitioners excluded from income as a parsonage

allowance amounts paid to or on behalf of Driscoll for

second homes, "lake houses" on Lake Ocoee, by

Ministries * * *.

Respondent, as do petitioners, uses the plural "second homes" on

brief because petitioners owned two second homes at different

times during 1998, one of the taxable years at issue.

See supra

note 2.

"See H. Rept. 1337, supra; S. Rept. 1622, supra.

Respondent's reliance to support respondent's position as to the

meaning of the phrase "a home" in sec. 107 on the legislative

history of that section, which Congress made law when it enacted

the 1954 Code, is puzzling. That is because (1) respondent

concedes that the rationale for the original enactment of the

excludible parsonage allowance in sec. 213 (b) (11) of the Revenue

Act of 1921 is "obscure" and (2) Congress did not intend any

change in the law when it changed the phrase "a dwelling house

and appurtenances thereof" used in the tax law before the 1954

Code to the phrase "a home" used in that Code, see supra note 7.

- 12 -

and the regulations under section 107," which also use the phrase

"a home", limit a- minister's excludible parsonage allowance to a

single home and do not allow such an allowance for a second home

such as petitioners' lake second home.

It is respondent's view

that, because section 107, its legislative history, and the

regulations under section 107 "refer in the singular to 'a home,'

"Sec. 1.107-1,

Income Tax Regs., provides-in pertinent

part:

Rental value of parsonages.--(a) In the case of a

minister of the gospel, gross income does not include

(1) the rental value of a home, 'including utilities,

furnished to him as a part of his compensation, or

(2) the rental allowance paid to him as part of his

compensation to the extent such allowance is used by

him to rent or otherwise provide a home. * * *

(b) For purposes of section 107, the term "home"

means a dwelling place (including furnishings) and the

appurtenances thereto, such as a garage.

The term

"rental allowance" means an amount paid to a minister

to rent or otherwise provide a home * * *

(c) A rental allowance must be included in the

minister's gross income in the taxable year in which it

is received, to the extent that such allowance is not

used by him during such taxable year to rent or otherwise provide a home.

Circumstances under which a

rental allowance will be deemed to have been used to

rent or provide a home will include cases in which the

allowance is expended (1) for rent of a home, (2) for

purchase of a home, and (3) for expenses directly

related to providing a home.

Expenses for food and

servants are not considered for this purpose to be

directly related to providing a home. Where the minister rents, purchases, or owns a farm or other business

property in addition to a home, the portion of the

rental allowance expended in connection with the farm

or business property shall not be excluded from his

gross income.

- 13 -

rather than 'homes'

in the plural", a minister is entitled to

have an excludible parsonage allowance for only one home."

We

disagree.

Respondent is substituting in section 107, its legislative

history, and the regulations under section 107 the phrase "a

single home" or the phrase "one home" for the phrase "a home"

that appears in the statute and the other authorities on which

"On brief, respondent expressly abandons any argument that

the phrase "a home" used in sec. 107 means "principal residence".

Respondent states:

Petitioners mistakenly allege that respondent's

position is that "a home" as used in the statute

107] means "principal residence," * * *

[sec.

Respondent has not defined home as used in I.R.C.

§ 107 as specifically the home which constitutes a

principal residence under other Code sections nor has

he ever made such an argument.

On brief, respondent also expressly abandons any argument

that the phrase "away from home" in sec. 162 (a) has any bearing

on resolving the issue presented under sec. 107.

Respondent

states:

Petitioners then quote from Brandl v.

Commissioner,

513 F.2d 697,

699

(6th Cir.

1975)

"because of the almost infinite variety of factual

situations involved, the courts have not formulated a

concrete definition of the term 'home' capable of

universal application." This case [Brandl v.

Commissionerl is inapposite to the facts herein because

it involves the meaning of "tax home" under I.R.C. §

162 for purposes of deducting traveling expenses, such

as meals and lodging by salesmen who travel and stay

overnight from their "tax home" which can be their

principal place of business in some situations.

- 14

respondent relies."

-

We find nothing in section 107, its

legislative history, or the regulations under section 107, which,

"On brief, respondent also asserts:

Respondent maintains that the legislative history and

regulations allow a minister to exclude from income the

payments from a religious organization for the home-the dwelling place--where the minister lives.

In the

case of the petitioners, they may own and visit

recreational lake houses or other houses, but their

home where they live is 345 Davis Trail NW, Cleveland,

TN. [petitioners' Cleveland home].

Respondent's assertion that petitioners "may own and visit * * *

[their second residence in Lake Ocoee], but their home where they

live is" their principal residence in Cleveland, Tennessee, flies

in the face of not only respondent's acknowledgment throughout

respondent's briefs that petitioners' second residence in Lake

Ocoee is their second home, see supra note 11, but also the

parties' stipulations of fact.

Respondent and petitioners

stipulated (1) that petitioners owned a residence in Cleveland,

Tennessee, which was petitioners' principal residence, and a

residence in Lake Ocoee, which was petitioners' second residence,

and (2) that "Each of these properties was used solely as a

personal residence".

The term "residence" is defined in

Webster's Third New International Dictionary (Unabridged) 1931

(2002) to include:

1 a: the act or fact of abiding or dwelling in a place

for some time: an act of making one's home in a place

* * * b: the act or fact of living or regularly staying

at or in some place either in or as a qualification for

the discharge of a duty or the enjoyment of a benefit

* * * 2 a (1): the place where one actually lives or

has his home as distinguished from his technical

domicile (2): a temporary or permanent dwelling place,

abode, or habitation to which one intends to return as

distinguished from a place of temporary sojourn or

transient visit (3): a domiciliary place of abode * * *

4 a: a building used as a home: DWELLING * * *

Thus, respondent and petitioners stipulated that each of

petitioners' residences (i.e., their- principal residence and

their second residence) was a, albeit not the only, "dwelling

place--where the minister [Mr. Driscoll] live[d]."

- 15 -

as respondent points out, all use the phrase "a home", that

allows, let alone requires, respondent, or us, to rewrite that

phrase in section 107."

We are not persuaded by those

authorities that Congress intended to allow, let alone did allow,

in section 107 an excludible parsonage allowance only for a

single home or one home of a minister."

Indeed, section

7701(m) (1) rejects respondent's position that the phrase "a home"

"In support of respondent's position as to the meaning of

the phrase "a home" in sec. 107, respondent also relies on the

"rule that exclusions from gross income under I.R.C. § 61(a) are

narrowly construed in favor of taxation."

Respondent therefore

asserts that "'a home' should be narrowly construed in favor of

taxation and treated as singular". The rule on which respondent

relies does not necessarily or automatically require holding

against a taxpayer who claims an exclusion from gross income.

For example, in Warren v. Commissioner, 114 T.C. 343 (2000), a

Court-reviewed opinion, members of the Court disagreed over the

meaning of the phrase "rental allowance" in sec. 107(2) where the

parsonage allowance that was provided to a minister as most or

all of his compensation and that he used to provide a home was

more than the "fair market rental value" of the home.

Nonetheless, the Court did not invoke the rule on which

respondent relies (i.e., "exclusions from gross income * * * are

narrowly construed in favor of taxation") to hold against the

taxpayers in Warren.

Instead, the Court, with dissents, allowed

the taxpayers to exclude from gross income under sec. 107(2) the

parsonage allowance that the minister received and that he used

to provide a home, even though that allowance exceeded the "fair

market rental value" of the home.

The rule on which respondent

relies has no more application here than it did in Warren.

Here,

sec. 107 uses the phrase "a home".

Respondent wants to change

that phrase to read "a single home" or "one home".

The rule on

which respondent relies does not trump the language that Congress

used in sec. 107.

"We have consistently required "unequivocal" evidence of

legislative purpose before construing a section of the Code in a

manner that would override the plain meaning of the words used in

the section.

See, e.g., Warren v. Commissioner, supra at 349;

Zinniel v. Commissioner, 89 T.C. 357,

363-364

(1987).

- 16 -

in section 107 means a "single home" or "one home".

Section

7701(m) (1) provides:

SEC.

7701(m).

Cross References.--

(1) Other definitions.-For other definitions, see the following

sections of Title 1 of the United States

Code:

(1) Singular as including plural, section 1.

Section 1 of Title 1 of the United States Code in turn provides:

In determining the meaning of any Act of Congress,

unless the context indicates otherwise--

words importing the singular include and apply to

several persons, parties, or things; * * *

As pertinent here,

section 107 requires only that amounts

paid as part of a minister's compensation be used to rent or

provide a home, i.e., a dwelling house of the minister, in order

to be excluded from the minister's gross income.

107(2).

See sec.

In the present case, during each of the years at issue,

the Ministries paid Mr. Driscoll as part of his compensation the

Ministries parsonage allowance which he used to provide for

himself a home or a dwelling house in Cleveland, Tennessee

(i.e.,

petitioners' Cleveland home), and a home or a dwelling house in

Lake Ocoee

(i.e., petitioners' lake second home).

Those facts

satisfy the requirements in section 107(2) for the exclusion from

- 17 -

gross income of the portion of the Ministries parsonage allowance

with respect to petitioners' lake second home."

We hold that the portion of the Ministries parsonage

allowance that the Ministries paid to Mr. Driscoll as part of his

compensation during each of the years at issue and that he used

during each of those years to provide for himself a lake second

home satisfies the requirements in section 107(2)

that an

allowance be paid to him as part of his compensation and be used

to provide a home.

Accordingly, we hold that petitioners are

entitled for each of the taxable years at issue to exclude from

gross income under section 107 the Ministries parsonage allowance

with respect to their lake second home.

We have considered all the contentions and arguments of the

parties that are not discussed herein, and we find them to be

without merit, irrelevant, and/or moot."

"Respondent does not dispute that petitioners are entitled

to exclude from gross income under sec. 107 the portion of the

Ministries parsonage allowance with respect to their Cleveland

home.

See supra note 3.

"We shall address briefly respondent's concern that holding

for petitioners in the instant case will "open the door to an

unlimited number of residential properties being treated as

parsonages for one minister." Respondent is speculating about

cases that are not before us.

We decline to do so. We have

decided on the basis of the facts that the parties stipulated and

the respective arguments that they advance only the issue presented to us in this case.

- 18 To reflect the foregoing and petitioners' concessions in the

stipulation of settled issues,

Decision will be entered

under Rule 155.

Reviewed by the Court.

WELLS,

THORNTON, HOLMES, and PARIS, ll.,

agree with this

majority opinion.

MORRISON, J., concurs in the result only.

MARVEL, J., did not participate in the consideration of this

opinion.

- 19 -

WHERRY, J., concurring:

I agree with the majority opinion

but write separately to emphasize the limited factual record on

which this case was decided.

As noted in the majority opinion the word "home" in section

107 should, after application of section 7701(m), be read to mean

home or homes.

States,

See Kislev Partners, L.P. ex rel. Bahar v. United

84 Fed. Cl. 385,

389

(2008).

For many years courts have interpreted statutory provisions

in accordance with their common meaning.

"'The legislature must

be presumed to use words in their known and ordinary

signification.' * * * 'The popular or received import of words

furnishes the general rule for the interpretation of public

laws.'"

Old Colony R.R.

Co. v.

(1932).

(citations omitted).

Commissioner,

284 U.S.

552,

560

Consequently, I respectfully

reject my dissenting colleagues' view that "a home" is ambiguous

and that two homes, which they acknowledge is not impossible,

should not be permitted here because "'exclusions from income

must be narrowly construed.'"

Dissenting op, p. 22.

By design of the parties, this case was submitted for

decision under Rule 122.

The result, when combined with the

parties' briefs, is a very narrow question posited for our

decision.

That question is whether section 107(2)

one home or both homes.

covers only

- 20 -

That question was effectively resolved when the parties

stipulated that

6.

The parsonage allowance paid by the Ministry

covered the following properties:

a.

During all of the years at issue, a

residence at 345 Davis Trail NW, Cleveland, Tennessee

that constituted the principal residence of Mr.

Driscoll and his family.

b.

A second residence at the Parksville

Lake Summer Home area of the Cherokee National Forest,

Lake Oconee, near Cleveland, Tennessee. There were two

properties owned during this period, one from January,

1996 through April, 1998, which was sold in April,

1998, and a second one from April, 1998, through

December 31, 1999; and

8.

Each of these properties was used solely as a

personal residence and not for any commercial purposes.

None of the properties.was rented.

Thus, the majority's answer here is that it may cover more than

one home.1

Necessarily absent from our consideration of this case are

important regulatory considerations which were not fully

addressed in the stipulation or on brief.

See section 1.107-

1(a), Income Tax Regs., which specifies that "In order to qualify

for the exclusion,

the home or rental allowance must be provided

as remuneration for services which are ordinarily the duties of a

To persons living in densely populated areas this may seem

anomalous.

But in the sparsely populated rural West and Alaska,

a minister of the gospel may serve a congregation covering a

geographic area considerably larger than the State of Rhode

Island.

In such a situation, the minister may well need more

than one home, particularly in mountainous areas with sometimes

severe winter weather.

- 21 -

minister of the gospel.

In general, the rules provided in

§ 1.1402 (c)-5 will be applicable to such determination."

This

consideration necessarily involves factual questions of why the

remuneration was provided and whether it was reasonable

compensation and may indirectly raise issues of private benefit

and personal inurement, none of which were considered here.

Orange Cnty. Agric. Socy., Inc. v. Commissioner,

Cir.

1990), affg. T.C. Memo.

(2d

Catholic Church v.

Commissioner,

73 T.C.

631 F.2d 736

(7th Cir. 1980); Church of Gospel Ministry, Inc. v.

United States,

640 F.

196

1988-380; W.

893 F.2d 529

See

(1979), affd. without published opinion

Supp.

96

published opinion 830 F.2d 1188

(D.D.C.

(D.C.

1986),

Cir.

affd.

1987).

without

Thus, my vote

in this case is predicated on its limited facts and the specific

issue raised.

THORNTON and HOLMES, 22. agree with this concurring opinion.

I

- 22

GUSTAFSON, J.", dissenting:

-

I would hold,

in favor of the

IRS, that section 107(2) does not exclude from income a parsonage

allowance for two residences.

I.

Exclusions from income must be narrowly construed.

Section 107(2) provides that gross income does not include a

minister's "rental allowance * * * to the extent used by him to

rent or provide a home."

(Emphasis added.)

Mr. Driscoll invokes

this provision to exclude an allowance that he used to provide

two homes for himself.

This interpretation of section 107(2)

is

not impossible; but it is, at best, no more likely than the

interpretation that one properly excludes a rental allowance only

to the extent it is used to provide one home.

Therefore,

since

the most that can be said for Mr. Driscoll's position is that

section 107(2)

is ambiguous,

I believe this case is simply

decided by reference to the rule "'that exclusions from income

must be narrowly construed.'"

323, 328

248

(1995)

(1992)

Commissioner v. Schleier, 515 U.S.

(quoting United States v. Burke,

(Souter, J., concurring)).

504 U.S. 229,

If we adopt the narrower

construction, then we must hold against Mr. Driscoll and in favor

of the IRS.

II.

The IRS's interpretation of section 107(2)

is more likely.

In addition to the mere fact that the indefinite article "a

and the word "home" are both singular,l there are two features of

The statute's use of a singular article and noun is not

decisive of this question for the reason that Mr. Driscoll argues

(continued...)

- 23

-

section 107(2) that indicate it excludes from income only an

allowance for one residence:

A.

A person has one "home".

In common usage, a person has one "home",2 and the word

therefore has a connotation of singularity.

The majority

evidently discounts this connotation because the 1954 Congress

that replaced the prior "a dwelling house and appurtenances

thereof" with "a home" stated that it intended no substantive

change.3

That Congress, however, used the word "home" in its

description -of then-present law:

(...continued)

and that the majority stresses, majority op. p. 16:

"unless the

context indicates otherwise * * * words importing the singular

include and apply to several * * * things".

1 U.S.C. sec. 1

(2006) ("the Dictionary Act").

However, by its terms this

provision applies only "unless the context indicates otherwise";

and section 107(2) is hardly an instance "Where the intent of

Congress seems clear but is frustrated by the use of the singular

in the statutory wording." Fields v. Commissioner, 189 F.2d 950,

952

(2d Cir.

1951),

affg.

14 T.C.

1202

(1950).

Thus,

I consider

the singular character of the phrase "a home" to be some

indication of the congressional intent.

2The leading (non-obsolete) definition of "home" in the

Oxford English Dictionary (1933) is "A dwelling-place, house,

abode; the fixed residence of a family or household; the seat of

domestic life and interests; one's own house; the dwelling in

which one habitually lives, or which one regards as one's proper

abode"; and the first definition for "home" in Webster's Third

New International Dictionary (1966) is "the house and grounds

with their appurtenances habitually occupied by a family : one's

principal place of residence : DOMICILE".

3See majority op. pp. 8-9 & note 7

83d Cong., 2d Sess. A35

Sess. 186 (1954)).

(1954); S. Rept.

(citing H. Rept. 1337,

1622,

83d Cong., 2d

- 24

-

Under present law, the rental value of a home furnished

a minister of the gospel as a part of his salary is not

included in his gross income.

H. Rept. 1337, 83d Cong., 2d Sess. 15

see also S. Rept. 1622,

(1954)

83d Cong., 2d Sess.

(emphasis added);

16

(1954).

Thus,

Congress manifestly thought in 1954 that the allowance had always

been for a "home", and the connotations of the word "home"

therefore properly inform our understanding of what Congress ,

intended when it provided an exclusion for an allowance used to

provide "a home".

By excluding an allowance for a "home",

the

statute has connoted at least since 1954 that an allowance for

only one residence is excluded.

In this vein, the IRS contends (in its reply brief at 3-4

(emphasis added)):

[T]he legislative history and regulations allow a minister

to exclude from income the payments from a religious

organization for the home--the dwelling place--where the

minister lives.

In the case of the petitioners, they may

own and visit recreational lake houses or other houses, but

their home where they live is [the stipulated principal

residence].

I find no concession or contradiction of this contention-when the

IRS's opening brief refers to Mr. Driscoll's other residence as a

"second home".

That phrase--like "summer home",

"vacation home",

and "home away from home"--presumes the existence of a prior

"home" that is one's habitual dwelling.

The phrase "second home"

refers instead to a secondary residence that is not one's actual

"home".

- 25

B.

-

An allowance is excluded only "to the extent used * * *

to * * * provide a home".

However many "homes" or "second homes" a minister may have,

he can use only one of them at a time.

If a minister were to use

an allowance to provide a principal residence for himself and

were to use a second allowance to pay for a second house that he

never occupied, the exclusion of section 107(2) would be

manifestly inapplicable to the second allowance because it was

not ever "used * * * to * * * provide a home".

allowance did not "provide

[him]

That second

a home" if he did not ever live

at the residence for which it paid.

On the other hand,

if a minister were to split his year

between two "homes" in both of which he did live (but only part

time)," it could be said that the allowances given for each of

those residences did "provide a home" for part of the year.

However, those allowances would be excluded (as the statute says)

only "to the extent used by him to * * * provide a home."

(Emphasis added.)

To the extent that a minister uses an

allowance to pay the rent of the house he is actually inhabiting,

he is using the allowance to "provide a home."

But to the extent

he makes his "home" elsewhere and uses an allowance to pay the

rent on an empty house, he is not using the allowance to "provide

a home."

The "to the extent" limitation in section 107 assures that a

minister can exclude an allowance from income only to the extent

- 26 -

he uses it to "provide a home"--i.e., a house where he actually

lives.

If a minister divides his year between two homes paid for

by two allowances, then a portion of each may be excluded from

income.

In this case the record provides no information on the

quantum of Mr. Driscoll's use of the two residences.

The IRS did

not disallow any of the exclusion of the allowance for

Mr. Driscoll's principal residence, and Mr. Driscoll did not

argue for any allocation that might have been more favorable.

Mr. Driscoll therefore used the full extent of the section 107

allowance on his principal residence.

III. Exclusion of multiple parsonage allowances would serve no

evident legislative purpose.

The majority states that the original congressional

rationale for the parsonage exclusion in 1921 is "obscure".

Majority op. p. 7.

This is hardly a warrant for interpreting the

provision broadly to exclude multiple allowances for houses

unoccupied for some or all of the year.

It is impossible to

substantiate, and difficult even to imagine,

a congressional

motive to extend the exclusion of section 107 to a second

residence, or a third, or a fourth.

The majority asserts that it approves today only the

exclusion of an allowance on a second residence; and the majority

brushes aside, as "speculat[ion] about cases that are not before

us", the IRS's expressed concern about "'an unlimited number of

residential properties being treated as parsonages for one

- 27 -

minister.'"

Majority op. note 19.

However, there is nothing in

Mr. Dr.iscoll's argument or the majority's reasoning that would

support any distinction between a "second home" and a "third

home".

The majority decides today that, if a property is a

dwelling house, then it is a "home" for which an allowance is

excludable, no matter the number of "homes" a minister may claim.

It is true that there are scenarios in which a minister may

work in (and therefore reside in)

several ministry locations.

For example, a minister may be an itinerant evangelist; another

minister in a sparsely populated area may serve multiple

congregations that are distant from each other; and another

minister may have seasonal duties in different locations.

A

narrow interpretation of section 107 might work to their

disadvantage.

However, in addition to the parsonage allowance

under section 107, the Code also includes section 119 (which

excludes lodging on the employer's premises for the employer's

convenience)4 and section 162 (a) (2)

(which allows a deduction for

traveling expenses "while away from home")."

Taken together,

4If a minister who maintains his section 107 home in one

location is required to be away from home, the value of his stay

in a rectory or "prophet's chamber" on church premises may be

excludable under section 119.

sThe minister who is required to be temporarily away from

home and to pay for a hotel or other temporary housing may be

entitled to deduct that expense under section 162(a) (2).

He is

temporarily away from his home; but it remains his "home"; and the rent he pays on that home is spent to "provide a home" from

(continued...)

- 28 sections 119, 162(a) (2), and 107

(construed to exclude only a

single parsonage allowance) would address many of these multipleministry scenarios.

If there is an argument to be made that

these Code provisions make inadequate provision for some of these

scenarios, it is an argument that was not made here and thus is

not before us.

The record includes no suggestion of ministry

undertaken at two locations; and instead the parties stipulated

that Mr. Driscoll's principal residence was in Cleveland,

Tennessee, and that his second home was "near Cleveland,

Tennessee".

The chance that Congress in 1954 thought it was permitting

the exclusion of multiple parsonage allowances seems remote.

There is therefore no reason not to apply the general rule that

exclusions are construed narrowly.

I would apply that general

rule here and hold that section 107(2) excludes only an allowance

used to provide the single home where the minister actually

resides.

COLVIN, HALPERN, GALE, GOEKE, and KROUPA, ll.,- agree with

this dissent.

s(...continued)

which he is only temporarily absent.

However, if a minister

changes his location and then inhabits a dwelling that now

becomes truly his "home" for purposes of section 107, then in

that new location he is not "away from home" for purposes of

section 162(a) (2).

He can exclude under section 107 any

allowance for the expense of the new home, and he cannot deduct

that expense under section 162.