Friday, August 7, 2020


Hernandez v. Commissioner

GiftLaw Note:
In Hernandez v. Commissioner, 490 U.S. 680 (1989), the Court determined that Church of Scientology auditing fees were not deductible. Ordinarily, gifts to qualified exempt charities entitle the donor to a charitable deduction for income tax purposes. The basic rationale for the charitable deduction is that the gift accomplishes a public good. However, expenditure for a fixed-price service to the donor suggests that this transfer is a commercial exchange rather than a charitable gift.

The Church of Scientology had created mandatory fixed prices for auditing and training sessions. Since the training sessions require fixed-mandatory payments, even though there may be some religious benefit, the practical result is that this is a payment in exchange for services. Therefore, the deduction is denied.


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