An ordained minister and his wife were not entitled to exclude from their gross income the portion of a parsonage allowance they used to support their second home, the U.S. Court of Appeals for the Eleventh Circuit has found (Commissioner v. Driscoll, CA-11, 2012-1 ustc ¶50,187). The parsonage allowance exclusion was only available for one home, the court stated.
In each of the tax years at issue, the taxpayers owned a principal home or residence in Cleveland, Tennessee and a second home in the Parksville Lake Summer Home Area of the Cherokee National Forest. The ministry that employed the husband provided a parsonage allowance for both homes.
The Tax Court, in Driscoll v. Commissioner, Dec. 58,415, 135 TC 557, held the requirements for the parsonage exclusion were satisfied, because the minister used the allowance to provide a home or dwelling for himself and did not use the second home for any business purpose. The lower court stated that nothing in Code Sec. 107, its legislative history, or the relevant regulations limited the phrase “a home” in Code Sec. 107 to only one home for purposes of the excludible parsonage allowance.
The Tax Court stated that, when interpreting a Code provision, a word in the singular should be construed as including and applying to several persons or things. Accordingly, both the taxpayers’ principal home and their vacation home were homes and the exclusion for the parsonage allowance could apply to amounts received on behalf of each.
The Eleventh Circuit found that the Tax Court erred when it concluded that the word “home” in Code Sec. 107 included both singular and plural forms of the word because the statutory context did not support such an interpretation. It adopted the IRS’s position that the exclusion from gross income for parsonage allowances only applied to payments made with respect to the principal residence of a “minister of the gospel,” not to the minister’s second home. The IRS noted that Code Sec. 107 referred to “a home” (singular) and stated that when Congress provided for a parsonage allowance, it intended for this to be for a single residence.
The appeals court rejected the Tax Court’s reasoning that, since the Code cross-references the general rule of statutory construction that nouns in the singular also include their plural forms, the word “home” in Code Sec. 107 should be read to include “homes.” It noted that cross references in the Code were only for convenience and were not to be given legal effect. Instead, the court adopted a dictionary definition of the work home as “one’s principal place of residence.”
The Eleventh Circuit also rejected the taxpayers’ argument that, if Congress had intended to limit the income exclusion under Code Sec. 107(2) to the minister’s principal residence, it could have added language to that effect. That Congress refers to “principal residence” in other provisions does not inevitably lead to the conclusion that the word “home” in Code Sec. 107 is plural, especially when the statutory context of the word does not support a plural connotation. The consistent use of the singular in the legislative history of Code Sec. 107 demonstrated that Congress intended for the parsonage allowance exclusion to apply to only one home.