In 2010, a Tax Court ruled that a minister is not limited to one principal residence for purposes of the housing/parsonage allowance exclusion.
The minister excluded the parsonage allowance paid by his employer on two primary residences. In contrast, the IRS had said the minister could only exclude a parsonage allowance, paid by the minister’s employing ministry, on his primary residence even though the minister/taxpayer had a second home at a nearby lake. This second home met the use criteria, as defined in the Internal Revenue Code (Code), to otherwise be considered a personal residence.
The Tax Court sided with the minister, and in a divided opinion, said the IRS sought to substitute the phrase “a single home” or “one home” for the phrase “a home” that is currently in the Code. The Court found no basis for the IRS’ position; in fact to the contrary, it said the Code talks about words in the singular which can and do have the connotation of a plural meaning.
The finding will likely be appealed to the applicable Circuit Court of Appeals by the IRS and then to the Supreme Court if it does not prevail in the Circuit’s Court of Appeals. However, ministers can rely on the Tax Court’s opinion, for now, if they want to claim a housing or parsonage allowance on applicable personal residence(s).
Obviously, a thorough discussion with one’s legal and tax counsel is highly recommended given the IRS’ position on this topic.