Hernandez v. Commissioner

490 U.S. 680 (1989)

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Nature of the Case

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Facts

P was a member of the Church of Scientology. The case gives an interesting synopsis of their beliefs. Auditing was part of this belief, and church members were also offered doctrinal courses known as training. Of course, all Scientologists are taught that spiritual gains result from participation in such training courses. The church charged fixed donations for participants to gain access to auditing and training. The proceeds from auditing and training were the primary source of income for the church. The church even gave discounts for payment in advance and advertised through media for new converts. P made payments for auditing and training and sought to deduct them on his tax return as charitable contributions under 170. The IRS was not amused. Before trial on these matters, the IRS stipulated that the branch churches of Scientology are religious organizations entitled to receive tax-deductible charitable contributions. The sole issue was whether the auditing or training sessions constituted contributions or gifts under 170. Because P had received consideration for his gift, the tax court determined that these costs were not deductible under 170. The First Circuit affirmed. The Supreme Court granted certiorari to resolve differences between the circuits regarding the deductibility of auditing and training payments.