[Anonymous]

Ok, I got a question for all you REG experts out there. I’ve encountered two questions from Gleim and cannot figure out why we are including the value of Parsonage on one question, but excluding it from another.

Question 1: (here we include Parsonage in GI)

Jeffrey Smith is a full-time ordained clergyman at the Mission Church. The church allows him to use the parsonage, which has an annual fair rental value of $4,800. The church pays him an annual salary of $13,200, of which $1,200 is designated for utility costs. His utility costs during the year were $1,000. What is Mr. Smith’s income for self-employment tax purposes?

A. $13,200

B. $18,200

C. $18,000

D. $12,000

Answer (C) is correct. In the case of a non-retired minister, net earnings from self-employment in connection with the

performance of religious duties are computed without regard to Sec. 107 (exclusion of rental value of home or

parsonage). Therefore, the $13,200 annual salary plus the $4,800 rental value is used to determine Mr. Smith’s self-employment taxes.

Question 2 (In this question, the choice is not D. So we should exclude it from GI):

An ordained minister cannot exclude the following from gross income:

A. Fees for marriages, baptisms, and funerals.

B. Actual cost to provide a home.

C. Rental allowance.

D. Fair rental value of parsonage.

Answer (A) is correct. Under Sec. 61, salaries and fees for personal services are always included in gross income. A

minister should include his salary; the offerings given directly to him for marriages, baptisms, funerals, etc.; and the

other outside earnings donated by him to the organization in his gross income. Reg. 1.107-1 excludes from gross

income the rental value of a home, or a rental allowance to the extent it is used to rent or provide a home, furnished to a

minister as a part of his/her compensation. A minister is entitled to deduct mortgage interest and real property

Somebody help. Why are these two questions contradicting each other??

I really hate REG with a passion. This is soooooooo nitpicky!!!! Errr!

[Anonymous]

The first question asks for income for SE tax, which sec. 107 does not apply. The second question asks for income for Income tax purposes which sec. 107 does apply. Sec. 107 only applies to calculating income tax NOT SE tax.

[Anonymous]

Thanks!!

Wow, that is nitpicky. I don't if I can pass this. This is insane. Ugh!!!

[Author]

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