Even if he qualifies as a minister - and even if he
qualifies for a housing allowance - the entire housing
allowance is not automatically excluded from taxable income.
It must all be spent on housing expenses in order for all of
it to be excluded from income.

For instance, if his total compensation is $50,000 and 40%
is housing allowance ($20,000), if he only spends $18,000 on
housing expenses the other $2,000 will need to come back in
as wages on line 7.

Mary Ann Thomas, EA in AZ

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

It does if the denomination (in this case, a major
Protestant denomination headquartered in the USA) has an
agreement with the IRS that those professors who qualify as
"Doctors of Religion" (which this client does) are "called"
by the religious body and qualify for same tax treatment as
ministers/pastors.

- quote -

Yes, the 60/40 split is a predesignation.

- quote -

Good thought... I'll ask him about the actual original
contract.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

I am not sure that the professor should be receiving a
housing allowance or. in fact, if he has one.

Have a doctorate and teaching in a denomination college does
not make one eligible to receive the housing allowance.
Also, there is no information in the posting that indicates
that the housing allowance being taken was a predesignated
amount.

If he does qualify for a housing allowance there does not
appear to be any predesignation of housing allowance to the
additional amount in question.

The 60/40 split referenced could refer to a predesignation.
I would have to read the contract to see how it was written
to make sure that he qualifies for the housing allowance to
start with and then to determine if this additional income
seems to fall within the scope of this contract or if it is
actually a new and different contract.

I think there are too many questions to make any
determination at this point.

I do agree that it could be possible.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

I am not a tax pro.

But it seems to me that the deal offered by the university
contains at least several elements of consideration
(duties), 1. That he maintain silence and 2 that he remain
on staff as "standyby" and in that light I would continue
to treat his compensation as wages. The legal concept of
consideration includes agreeing not to do something.

I have a personal problem with aggressive use of housing
allowances but that is not your question. If the prior
60/40 split passed muster, I would look to if there are any
changes in his status, and if not, I would continue said
treatment. The fact that he was assigned very limited duties
does not mean he gave up the calling.

(If he moved away and was not in fact available to be called
because he took another position I might think otherwise.)

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Client is a professor (of a secular subject) at a religious
university of a major denomination. He completed the
necessary course work to be granted the title, "Dr. of
Religion" and to be considered "called" and eligible to
treat his salary and housing allowance under the rules for
ministers. He has done so for the past 3 years. In June,
his contract with the university expired and he declined to
renew it. The university offered him a "deal" of the
equivalent of 6 months salary (unearned) in exchange for a
commitment to remain silent about why he chose not to renew
his contract. He is still considered "called" by his
denomination and is "on standby" for placement in any of the
denomination's several universities.

I am seeking the opinions of other tax professionals on
these two points:

1. Is this money that he was paid to keep his mouth shut
considered wages (and thus subject to SE tax) or is it misc
(unearned) income?

2. If wages, can he take the same 60%/40% split that he was
using for housing allowance over the past three years or is
none of it allowable for housing allowance?

Thanks in advance for your opinions
Elizabeth A. Brennan, EA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->