*153 Decision will be entered for the respondent.
Held, petitioners are not entitled under section 107, I.R.C. 1954, to exclude from gross income on their Federal income tax returns for the taxable years 1958, 1959, and 1960, amounts expended in those years for rent and utilities on their home.
*605 Respondent determined deficiencies in the income taxes of petitioners for the years and in the amounts as follows:
| Year | Deficiency |
| 1958 | $ 355.37 |
| 1959 | 396.87 |
| 1960 | 398.75 |
The issue is whether petitioners are entitled to exclude from gross income certain amounts of petitioner Richard R. Eden's compensation from the Highland Baptist Church as rental allowance under section 107 of the Internal Revenue Code of 1954.
FINDINGS OF FACT
*154 Petitioners are husband and wife and have, since August 1, 1958, resided in Dallas, Tex. They filed their joint Federal income tax returns on a cash basis for the calendar years 1958, 1959, and 1960, with the district director of internal revenue at Dallas, Tex. Since the issue concerns salary received by petitioner Richard R. Eden, he hereinafter will be referred to as petitioner.
Petitioner decided to become a full-time Christian worker in 1945 when he was 19 years old. He holds a bachelor of arts degree with a major in Bible and minors in English and voice from Baptist College, Hardin-Simmons University, and a master of religious education degree from Southwestern Baptist Seminary. During the years in issue petitioner had not been licensed, ordained, or commissioned as a minister.
Subsequent to receiving his degree from Southwestern Baptist Seminary, petitioner worked for the First Baptist Church at Frederick, Okla., approximately during the years 1951 through 1955. He was employed by the First Southern Baptist Church at Colorado Springs, Colo., as minister of music and education during the years 1956 to 1958. His salary at this church was approximately $ 7,200 and he was*155 furnished a church-owned parsonage in which to live.
On June 29, 1958, the Highland Baptist Church called petitioner to employment as minister of education and music at a salary of $ 8,000. *606 The church could provide no parsonage. Petitioner accepted this call and began employment with that church on August 1, 1958.
Petitioner's duties at the Highland Baptist Church consist of planning and conducting the music program of the church; directing the church's educational activities, including the Sunday School, the Training Union, and the adult service organizations; assisting in the worship services of the church; visiting the sick; soliciting new members; and counseling with those persons desiring assistance. Thirty to thirty-five percent of petitioner's time is devoted to conducting the church's music activities.
Dr. Charles P. Pitts is the minister of the Highland Baptist Church. As minister of the church he is responsible for overseeing all church functions. He conducts the worship services of the church, including delivering the sermons, baptizing, and leading in observance of the Lord's Supper. He serves as moderator in church conferences, performs weddings, and conducts*156 funeral services. In addition, he makes hospital and membership visitations and performs personal counseling services. Dr. Pitts has been licensed and ordained as a minister.
Southern Baptist churches are autonomous governmental units. Each church selects its own minister, and any person designated as its minister will generally be accepted as a minister by other Southern Baptist churches. Petitioner was called to his employment with the Highland Baptist Church by majority vote of the congregation in the same manner as was Dr. Pitts. The personnel committee of the church hires other members of the church staff.
In 1961 the congregation of the Highland Baptist Church adopted a resolution commissioning Richard R. Eden as minister of the gospel effective as of June 29, 1958, the date on which the church extended the call to petitioner to become its minister of education and music. This resolution did not change petitioner's terms of employment or effect a change in the actual functions he performed in carrying out the duties of his employment.
The budget of the Highland Baptist Church for 1962 provided that the compensation to be paid petitioner in that year was composed of $ 6,200*157 salary, $ 1,800 rental allowance, and $ 600 car allowance.
On their Federal income tax returns for the years 1958, 1959, and 1960, petitioners reported petitioner's salary from the Highland Baptist Church ($ 3,330 for 1958 and $ 8,000 for each of the years 1959 and 1960) as income but excluded from their total income reported $ 1,708.48, $ 1,925.96, and $ 1,941.05, respectively, representing the amounts actually expended by them for rent and utilities on their home. Respondent disallowed these amounts claimed as rent and utility expenses on the grounds that petitioner was not ordained, commissioned, or licensed as a minister of the gospel and was not performing the duties ordinarily performed by a minister of the gospel.
*607 OPINION
The only issue is whether petitioners are entitled to exclude from gross income reported on their Federal income tax returns for 1958, 1959, and 1960, the amounts expended by them for rent and utilities during the respective taxable years in issue under section 107 of the Internal Revenue Code of 1954. 1
*158 On brief, respondent contends that these amounts are not excludable from gross income under section 107 for the reasons that petitioner was not a "minister of the gospel" as contemplated by that section and that no part of the salary received by petitioner from the Highland Baptist Church was officially designated as a rental allowance within the meaning of section 1.107-1(b) of the Income Tax Regulations. We need not decide whether petitioner was a "minister of the gospel" within the purview of section 107 since the evidence clearly establishes that no part of petitioner's compensation from the Highland Baptist Church for the years in issue was designated as a rental allowance.
Although the question of the absence of any "designation" of a part of petitioner's salary for rental purposes was not specifically mentioned in the notice of deficiency or the pleadings filed, we think the necessity for such a designation is implicit in the phrase "rental allowance" contained in section 107, and it is specifically mentioned as one of the prerequisites for deduction in the regulations promulgated under section 107. Moreover, in his opening statement, respondent referred to the absence of*159 any designation by the church for rental allowance, and, at the trial, albeit over petitioner's objection, offered testimony which clearly establishes that there was no designation by the Highland Baptist Church of any part of petitioner's salary for the taxable years 1958, 1959, and 1960, for rental allowance. We think the question is one which the Court must necessarily determine herein under the statutes and regulations involved.
Section 107 provides that the gross income of a minister of the gospel does not include the rental allowance paid to him as part of his compensation to the extent it is used by him to provide a home. 2
Income Tax Regulations section 1.107-1(b) provides:
The term "rental*160 allowance" means an amount paid to a minister to rent or otherwise provide a home * * * if such amount is designated as rental allowance pursuant to official action taken in advance of such payment by the employing church or other qualified organization when paid after December 31, 1957. The designation of an amount as rental allowance may be evidenced in an *608 employment contract, in minutes of or in a resolution by a church or other qualified organization or in its budget, or in any other appropriate instrument evidencing such official action. The designation referred to in this paragraph is a sufficient designation if it permits a payment or a part thereof to be identified as a payment of rental allowance as distinguished from salary or other remuneration.
Petitioner himself testified that although he discussed provisions for a rental allowance with the personnel committee prior to his employment by the Highland Baptist Church, to his knowledge no official designation of a part of his salary as a rental allowance was made during the years in issue. The church clerk, who, as such, was custodian of the official records of the church and also a member of the personnel committee, *161 testified that the official records of the church show no designation of an amount of petitioner's salary as a rental allowance prior to the designation of $ 1,800 as such an allowance in the 1962 budget.
Since no part of petitioner's salary from the Highland Baptist Church was designated as rental allowance, respondent's determination that the amounts expended by petitioners during the years in issue for rent and utilities in providing their home are not excludable from gross income is sustained. Sec. 107, I.R.C. 1954; Income Tax Regs., sec. 1.107-1(b). See Ling v. United States, 200 F. Supp. 282">200 F. Supp. 282 (D.C. Minn.).
Decision will be entered for the respondent.
Footnotes
1. Except as otherwise indicated, all section references hereinafter will refer to the Internal Revenue Code of 1954.↩
2. SEC. 107. RENTAL VALUE OF PARSONAGES.
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.↩