Davis v. United States

Background

Harold and Enid Davis, members of the Church of Jesus Christ of Latter-day Saints, transferred money into the personal bank accounts of their two sons while the sons served as full-time, unpaid missionaries. The Church had sent letters estimating mission costs, missionaries followed Church rules, and the sons submitted weekly expense reports. The Davises claimed charitable deductions on amended tax returns; the IRS disallowed the refunds, and lower courts ruled against the Davises.

Reasoning

The Court addressed whether those transfers counted as charitable contributions “to or for the use of” the Church under §170, or as deductible unreimbursed expenses under the Treasury regulation for volunteer services. Relying on the history and the IRS’s longstanding view, the Court held that “for the use of” means funds must be held in an enforceable trust or similar legal arrangement for the charity’s benefit. Because the parents put money into their sons’ personal accounts with no legal trust, the gifts were not “for the use of” the Church. The Court also read the regulation as allowing deductions only for a taxpayer’s own unreimbursed service expenses, not expenses incurred by a third party.

Real world impact

The decision bars parents from deducting money they give directly to children serving as missionaries unless the funds are placed in an enforceable legal arrangement benefiting the charity. It clarifies that tax deductions for volunteer-related costs generally apply to the person who actually performs the charitable service. The Court declined to decide an agency-based argument that was not raised earlier.