HAROLD DAVIS AND ENID DAVIS, PETITIONERS V. UNITED STATES OF
   AMERICA

   No. 89-98

   In The Supreme Court Of The United States

   October Term, 1989

   On Writ Of Certiorari To The United States Court Of Appeals For The
Ninth Circuit

   Brief For The United States

            TABLE OF CONTENTS
   Question Presented
   Opinions below
   Jurisdiction
   Statute and regulation involved
   Statement
   Summary of argument
   Argument:
      The payments made by petitioners to their sons to
      cover the sons' living expenses while they served as
      missionaries are not deductible as charitable contributions
      under Section 170 of the Internal Revenue
      Code
      A. Petitioners' payments to support their children
         were not "to or for the use of" the Church within
         the meaning of Section 170 of the Code
         1. The basic system established by Congress
            ensures that deductible contributions will
            advance the public good by requiring that
            such contributions be transferred to the effective
            control of a qualified charitable
            organization
         2. Payments withheld from the control of a
            charitable organization by earmarking them
            to benefit a particular individual are not
            deductible
         3. Petitioners' direct payments to their children
            for living expenses were committed to the
            control of an individual, not the Church,
            and hence are not deductible as made "to or
            for the use of" the Church under Section
            170
      B. Petitioners' novel and exceedingly broad interpretations
         of the phrase "to or for the use of" are
         erroneous
         1. Section 170 does not permit the deduction of
            payments made to individuals simply because
            the payments confer some benefit
            upon a charitable organization
         2. The Church's estimate of a missionary's likely
            expenses and its review of his activities do
            not establish "control" over the disposition
            of his personal funds sufficient to justify a
            deduction for payments that parents make
            to their missionary children
         3. The payments in question are not deductible
            on the theory that they were made "to" the
            Church because petitioners' sons were acting
            as "agents" of the Church in accepting the
            payments and spending the funds on their
            own living expenses
      C. Petitioners' payments to support their children
         are not deductible as "unreimbursed expenditures"
         within the meaning of Treas. Reg.
         Section 1.170A-1(g)
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 1a-15a), as amended,
is reported at 861 F.2d 558.  The opinion of the district court (Pet.
App. 16a-25a) is reported at 664 F. Supp. 468.

                             JURISDICTION

   The judgment of the court of appeals was entered on November 14,
1988.  A petition for rehearing was denied on April 20, 1989 (Pet.
App. 27a).  The petition for a writ of certiorari was filed on July
19, 1989, and the petition was granted on November 6, 1989.  The
jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

                    STATUTE AND REGULATION INVOLVED

   26 U.S.C. 170, and 26 C.F.R. 1.170A-1(g), are set out in pertinent
part in an appendix to this brief.

                          QUESTIONS PRESENTED

   Whether amounts paid by petitioners directly to their children to
cover their children's living expenses while they served as church
missionaries are deductible by petitioners as charitable contributions
under Section 170(a) of the Internal Revenue Code (26 U.S.C.).

                          QUESTION PRESENTED

                               STATEMENT

   1. Petitioners and their sons, Benjamin and Cecil, are members of
the Church of Jesus Christ of Latter-Day Saints (the Church) (Pet.
App. 38a-39a).  The Church is recognized by the IRS as an organization
formed and operated for religious and charitable purposes within the
meaning of Section 170 of the Internal Revenue Code of 1954 (26
U.S.C.) (Pet. App. 5a), /1/ which means that contributions "to or for
the use of" the Church are tax deductible (see I.R.C. Section 170(a) &
(c)).  The Church operates a worldwide missionary program, in which
approximately 25,000 missionaries have participated annually since
1977 (Pet. App. 2a).

   In 1979, Benjamin Davis, who was then 18 years old, applied to
become a missionary.  Benjamin was accepted for two years of voluntary
service, and Church officials notified him that he would be assigned
to the New York City Mission.  The Church later provided Benjamin with
information relating to the New York City Mission and advised him of
the estimated amount of money that would be required to cover his
living expenses while in New York;  it appears that the estimate
provided by the Church was a range, rather than a specific amount (see
J.A. 20).  After a month's training at the Church's Missionary
Training Center in Provo, Utah, Benjamin moved to New York, where he
served as a missionary from November 1979 until December 1981.  Pet.
App. 3a, 17a, 40a-41a.

   Cecil Davis also applied to become a missionary after he turned 18
years old in 1980.  He was accepted for missionary service and
assigned to the Church's New Zealand-Cook Island Mission.  As in
Benjamin's case, the Church provided Cecil with information about his
mission and an estimate of the amount he would need for his expenses.
In August 1981, after training at the Missionary Training Center, he
reported to the New Zealand-Cook Island Mission.  Pet. App. 3a,
17a-18a, 42a-43a.

   During 1980 and 1981, while Benjamin was serving as a missionary in
New York, petitioners transferred $3,481 and $4,135, respectively, to
his personal checking account, on which he was the sole authorized
signatory.  Benjamin used the funds primarily to pay for his living
expenses, such as rent, food, and transportation.  A small portion of
these funds was used to purchase religious materials utilized in his
missionary work.  During 1981, while Cecil was serving as a
missionary, petitioners transferred $1,518 to his personal checking
account, on which he was the sole authorized signatory.  Cecil used
these funds to pay for his living expenses and personal needs, and
spent nothing for religious materials.  Pet. App. 3a-4a, 17a-18a,
41a-42a.

   Benjamin and Cecil were not required to seek Church approval of
expenditures made from their personal checking accounts, and, in fact,
they did not do so.  Each week they submitted a report to their
Mission President and Zone Leader describing the amount of time spent
in Church service, the type of missionary work accomplished, and other
matters of concern.  The report also contained a statement of the
total expenses for the week, but the expenses were not itemized.  They
were not required to turn over to the Church funds that were
unexpended at the conclusion of the mission.  Cecil had no such
remaining funds;  Benjamin purchased a camera with his funds shortly
before he terminated his mission.  At no time during their missions
did Benjamin or Cecil accept contributions from third parties to be
turned over to the Church.  Pet. App. 4a, 9a, 17a-18a, 24a, 42a-43a;
J.A. 21.

   2. Petitioners timely filed joint income tax returns for 1980 and
1981, claiming Benjamin and Cecil as dependents.  On these returns,
they did not claim any charitable contribution deduction for the
support payments made to their sons during those years.  In 1984,
petitioners filed amended income tax returns, claiming charitable
contribution deductions of $3,481 and $4,882 for the amounts
transferred to their sons while they served as missionaries.  The
Internal Revenue Service (IRS) disallowed the refund claims based on
these claimed deductions, and petitioners then instituted this refund
suit in the United States District Court for the District of Idaho.
Subsequently, petitioners filed a second set of amended returns in
1986.  On these returns, petitioners did not claim Benjamin as a
dependent.  Petitioners also altered the amount of their charitable
deductions to correspond to the estimate of living expenses that had
been projected by the Church in the letters sent to their sons
concerning their missions, slightly reducing the claimed deduction for
1980 and increasing the claimed deduction for 1981 to reflect amounts
paid to both Cecil and Benjamin.  See Pet. App. 18a, 45a.  /2/

   The district court granted summary judgment for the government
(Pet. App. 16a-25a).  The court held that the transfers made by the
parents to their sons were not "to or for the use of" a qualified
charity within the meaning of Section 170(a) of the Code, and hence
were not deductible by petitioners (Pet. App. 23a-24a).  Citing
several decisions by the Tax Court and the courts of appeals, the
court stated that, when a taxpayer asserts that a payment he makes to
another individual should be deductible on the theory that it is "for
the use of" of a charitable organization, he must show that the
charity "control(s)" the contribution -- i.e., that "the charity has
sufficient possession of the contribution so that it has discretion as
to the use to which the donated funds will be put" (id. at 24a).  The
court concluded that, in this case, control of the funds clearly lay
with petitioners' sons, not with the Church, because "(t)he particular
use to which the funds were put was solely within the power of the
missionary" (ibid.).  The court added (ibid.):

         It appears from the record before the court that the only
      role the church played in the distribution of the funds to the
      missionaries was to provide a projected budget range that would
      be needed for the particular area in which the missionary would
      be serving.  Beyond that information provided by the church,
      there is no indication that the church was involved in any way
      in controlling how the missionary's money was spent.

   The district court also ruled that petitioners' transfers were not
deductible under Treas. Reg. Section 1.170A-1(g) as "unreimbursed
expenditures made incident to the rendition of services to" a
qualified organization because such unreimbursed expenses may be
deducted only by the individual who actually performs the service
(Pet. App. 21a-23a).

   3. The court of appeals affirmed (Pet. App. 1a-15a).  The court
explained that "the basic requirement that the beneficiary of a
charitable contribution must be indefinite" underlies the system
permitting deductions for charitable contributions (id. at 9a).
Accordingly, the court noted, "where a taxpayer has claimed a
charitable deduction for funds that have been earmarked for a specific
individual, courts have considered whether the charity exercises
control over the use of the funds" (id. at 7a).  The court stated
that, so long as the qualified charity retains control over the funds,
the indefiniteness requirement can be satisfied, even when the
taxpayer intends a contribution to be used for a specific purpose (id.
at 9a).  "But when a taxpayer makes a contribution directly to the
intended beneficiary so that the charity never possesses the funds,
let alone controls their use, there can be no guarantee that the
beneficiary will be indefinite" (ibid.).  The court of appeals then
concluded that the Church lacked sufficient control over the funds
deposited directly into the checking accounts of petitioners' sons to
warrant allowing petitioners to deduct the payments as contributions
to the Church.  The court found that, "(w)hile the Church admonished
the missionaries to spend their money wisely, the particular use to
which the funds were put was solely within the control of the
missionaries(;) * * * other than requiring the missionaries to submit
weekly reports of their expenses, the Church had no discretion over
the disposition of the funds." Ibid.

   The court of appeals also held that petitioners could not deduct
the funds transferred to their sons as "unreimbursed expenditures"
incurred incident to the rendition of charitable services under Treas.
Reg. Section 1.170A-1(g).  Noting that a contrary rule would create
major administrative problems and provide the opportunity for improper
shifting of deductions among taxpayers, the court of appeals agreed
with the district court that the regulation permits the deduction of
unreimbursed expenses only by the person actually rendering the
services to the charitable organization.  Pet. App. 10a-14a.

                          SUMMARY OF ARGUMENT

   A. Under Section 170 of the Code, a contribution is tax-deductible
only if it is made "to or for the use of" a qualified organization.
This limitation is grounded in the basic rationale underlying the
charitable contribution deduction -- the belief that such
contributions serve the public good.  An essential element of the kind
of "public charity" that Congress determined to encourage is the
concept of "indefiniteness" of beneficiaries.  Thus, a donation to a
needy individual, though motivated by altruism, is not deductible
under the Code.  The system established by Congress for effectuating
this distinction between "public" and "private" charity depends upon
the recognition of qualified organizations, which the IRS can monitor
for continued compliance with the congressional standards, coupled
with allowing a deduction only for contributions made "to or for the
use of" those organizations.

   When a payment is merely channeled through a charity, in that the
charity's receipt is conditioned upon distribution of the funds to a
particular individual, the payment clearly does not advance the public
good in the manner contemplated by Congress.  Accordingly, the general
rule has emerged that payments made to a qualified charity, but
earmarked for the benefit of an individual, will be deductible only if
the charity can exercise discretion over the disposition of the funds.
 The same analysis has been applied to the converse situation
presented here -- where a payment is made directly to an individual,
but the taxpayer argues that the payment should be regarded as "to or
for the use of" a qualified organization because of some affiliation
between the individual and the organization.  If the organization
cannot exercise discretion over the funds, the payment does not
satisfy the limitations of Section 170.

   Petitioners' payments clearly do not satisfy the statutory
prerequisites for deductibility.  They were not dedicated to the
public welfare, but were made to fund the personal expenses of
petitioners' own children.  And, as both courts below found, it was
petitioners' children who controlled the disposition of the funds;
the Church exercised no discretion over how the funds were spent.

   B. The text, legislative history, and judicial and administrative
constructions of Section 170 all demonstrate the error of petitioners'
expansive reading of the phrase "for the use of" to cover all payments
made to individuals that will confer some benefit upon a qualifying
organization.  The language of the statute contemplates that the
organization will be able to "make use" of the funds, which entails
having control over their disposition.  The legislative history shows
that the phrase was added in 1921 for the limited purpose of
overturning a narrow administrative construction of the prior statute
-- namely, that a donation to a trust that invested the funds before
disbursing them to charitable organizations was not a contribution
"to" a qualifying organization.  Thus, the IRS and the courts
generally have viewed the added language as intended to convey a
meaning similar to "in trust for," to permit the current deduction of
payments to trusts or similar fiduciaries who receive payments from
the donor for eventual distribution to qualifying charities.

   The 1921 amendment was designed to build on the original scheme
requiring transfer "to" a qualifying organization by slightly
broadening the statute to cover closely analogous transactions.  It
was not intended to effect a major overhaul of that system by
authorizing deductions for all payments to individuals that might
incidentally benefit qualifying organizations.  The broad
interpretation advanced by petitioners, however, would extend the
reach of Section 170 to many kinds of private payments that heretofore
have never been thought to be deductible;  its practical effect would
be substantially to dismantle the qualified donee requirement that has
been at the heart of the statutory scheme since its inception.

   Petitioners' claimed deduction cannot be sustained on the theory
that the Church exercised control of the support payments made to
petitioners' sons.  The letter sent by the Church to the sons
estimating the amount of reasonable expenses may have advanced the
Church's goal of ensuring that its missionaries live frugally, but it
gave the Church no discretion over the disposition of the funds
transferred from parent to child.  And the fact that the sons reported
to a Church official the total amount of their expenditures after the
money was spent similarly gave the Church no discretion over the
disposition of the funds.

   C. Petitioners may not deduct the support payments as "unreimbursed
expenditures" under Treas. Reg. Section 1.170A-1(g).  That regulation
sets forth the general rule that a contribution of services is not
deductible, but relaxes that prohibition to allow the deduction of
certain unreimbursed expenses incurred in connection with providing
those services.  The text and structure of the regulation leave no
doubt that it is intended to permit a deduction only by the taxpayer
affected by the general prohibition on deducting contributions of
services, i.e., the taxpayer who both incurs the expense and performs
the service.  Moreover, if the rule were otherwise, it would open the
door to manipulation by taxpayers who could shift and anticipate
deductions -- giving the deduction to higher-income taxpayers who can
obtain a greater tax advantage from the deduction instead of the
lower-income taxpayers who actually incur the expenses, and allowing
the parent to make (and deduct) support payments in a tax year
preceding the actual expenditure of the funds.  Such consequences
would be far removed from the limited purpose and effect of the
regulation.

                               ARGUMENT

   THE PAYMENTS MADE BY PETITIONERS TO THEIR SONS TO COVER THE SONS'
LIVING EXPENSES WHILE THEY SERVED AS MISSIONARIES ARE NOT DEDUCTIBLE
AS CHARITABLE CONTRIBUTIONS UNDER SECTION 170 OF THE INTERNAL REVENUE
CODE

   Petitioners directly supplied their sons with funds with which to
pay the sons' living expenses while they served as missionaries on
behalf of their church.  Petitioners contend that these payments are
tax-deductible as payments "to or for the use of" the Church within
the meaning of Section 170 of the Code because the payments "primarily
benefit" or "serve the * * * purposes" of the Church (see Pet. Br.
23).  This contention, however, is not faithful to Congress's intent
and the limitations that it has deliberately imposed on the
deductibility of charitable contributions.  Congress has provided that
organizations meeting certain criteria should be eligible for
tax-deductible donations because they contribute to the public
welfare, and it has restricted tax deductions to gifts made "to or for
the use of" these qualified donees.  By monitoring the activities of
these organizations to determine whether they continue to meet the
relevant requirements and by enforcing the "qualified donee"
restriction, the IRS can administer the law to effectuate Congress's
intent.

   Petitioners' contention would seriously undermine the effectiveness
of the statutory restrictions by permitting taxpayers to avoid this
linchpin of the congressional scheme -- namely, that deductible
contributions be transferred to the control of organizations that the
government has determined serve the charitable public purposes
contemplated by Congress.  Not only would that deviation from the
statutorily prescribed system create enormous complications for the
IRS in enforcing the Code, it also would permit taxpayers to obtain
deductions for gifts that Congress did not intend to make deductible,
such as benevolently motivated gifts to individuals.  The result in
this case would be that petitioners are entitled to a tax deduction
(in some sense, a public subsidy (see Bob Jones University v. United
States, 461 U.S. 574, 591 (1983)) for quintessentially personal
expenses -- payments made to provide food and shelter to their
children.  And, more generally, acceptance of petitioners' contention
could open the door to the deduction of many other kinds of payments
that are routinely made for personal reasons.

   A. Petitioners' Payments To Support Their Children Were Not "To Or
For The Use Of" The Church Within The Meaning Of Section 170 Of The
Code

   1. The Basic System Established By Congress Ensures That Deductible
Contributions Will Advance The Public Good By Requiring That Such
Contributions Be Transferred To The Effective Control Of A Qualified
Charitable Organization

   Like the other deductions from gross income permitted by the
Internal Revenue Code, the deduction for charitable contributions
"depends upon legislative grace;  and only as there is clear provision
therefor can any particular deduction be allowed." Commissioner v.
National Alfalfa Dehydrating & Milling Co., 417 U.S. 134, 149 (1974);
New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Accordingly, the resolution of this case turns on the scope of Section
170 of the Code, in which Congress has specifically permitted the
deduction of certain charitable donations and delineated the
limitations on that deduction.  That provision defines a "charitable
contribution," for which a deduction from gross income generally is
allowed, as a "contribution or gift to or for the use of" eligible
organizations, which include entities organized and operated
exclusively for religious and charitable purposes.  /3/

   Section 170 of the Code dates back to Section 1201(2) of the War
Revenue Act of 1917, ch. 63, 40 Stat. 330, which authorized a
deduction for "(c)ontributions or gifts actually made * * * to
corporations or associations organized and operated exclusively for
religious, charitable, scientific, or educational purposes * * * ."
This provision was carried forward without any change pertinent here
in Section 214(a)(11) of the Revenue Act of 1918, ch. 18, 40 Stat.
1068.  Citing the statutory requirement that the gift be made "to" a
qualifying organization, the Bureau of Internal Revenue took the
position that this provision did not authorize deductions for
contributions to a trust or foundation that received and held the
donated funds for investment and ultimate disbursement for a
charitable purpose, because the trust or similar entity was not itself
operated exclusively for religious or charitable purposes.  See O.D.
669, 3 C.B. 187 (1920).  In 1921, Congress responded to the Bureau's
interpretation by amending the statute to permit deductions for
contributions "to or for the use of" qualifying organizations, thereby
covering contributions to trusts or similar entities that administer
funds for eventual distribution to a qualifying charity.  Section
214(a)(11) of the Revenue Act of 1921, ch. 136, 42 Stat. 241.  /4/ The
1921 provision was later incorporated into the Internal Revenue Codes
of 1939 and 1954.

   This statutory scheme governing the deductibility of amounts
claimed as charitable contributions thus has two major components.
First, the payment must qualify as a "contribution" or "gift," which
excludes payments made with the expectation of a commensurate return
or quid pro quo.  See generally Hernandez v. Commissioner, 109 S. Ct.
2136, 2143-2144 (1989).  Second, even if the payment is a gift in the
sense that it is made without the expectation of a return benefit, no
deduction is allowed unless the contribution is made "to or for the
use of" a qualified organization.  This second major component, which
is the one at issue here, /5/ may have the effect of denying a
deduction for payments that would ordinarily be regarded as motivated
by a "charitable" intent, such as a donation to a needy individual.
See, e.g., Dohrmann v. Commissioner, 18 B.T.A. 66, 68 (1929).
Nevertheless, the statutory requirement that charitable contributions
be made "to or for the use of" a qualified organization is integral to
the congressional scheme, and it must be scrupulously observed.

   This qualified donee requirement is grounded in the basic policy
underlying Section 170.  The rationale for allowing a taxpayer to take
a deduction for charitable contributions to private organizations is
the belief that these contributions serve the public good.  As this
Court explained in Bob Jones University v. United States, 461 U.S. at
588, the deduction provided by Section 170 is intended "to encourage
the development of private institutions that serve a useful public
purpose or supplement or take the place of public institutions of the
same kind." See also id. at 587-590 & n.11;  Trinidad v. Sagrada Orden
de Predicadores, 263 U.S. 578, 581 (1924) (tax exemption for
charitable organizations provided "in recognition of the benefit which
the public derives from corporate activities of the class named").
/6/

   The legislative history reveals that this object of furthering the
public welfare has always been at the forefront of Section 170 and its
predecessors.  In justifying the deduction when it was first proposed
in 1917, one Senator explained:  "For every dollar that a man
contributes for these public charities, educational, scientific, or
otherwise, the public gets 100 percent." 55 Cong. Rec. 6728 (1917)
(statement of Sen. Hollis).  See also 61 Cong. Rec. 5294 (1921)
(statement of Rep. Green) ("The gifts must be made exclusively for
public purposes").  Congress elaborated upon this theme when it
reenacted the deduction for charitable contributions in the 1939 Code.
 The House Report explains (H.R. Rep. No. 1860, 75th Cong., 3d Sess.
19 (1938)):  "The exemption from taxation of money or property devoted
to charitable and other purposes is based upon the theory that the
Government is compensated for the loss of revenue by its relief from
financial burden which would otherwise have to be met by
appropriations from public funds, and by the benefits resulting from
the promotion of the general welfare." See also H.R. Rep. No. 1337,
83d Cong., 2d Sess. A44 (1954);  S. Rep. No. 1622, 83d Cong., 2d Sess.
196 (1954).

   As this Court has recognized, Congress was guided in instituting
the charitable exemption and deduction provisions by the law of
charitable trusts.  Bob Jones University v. United States, 461 U.S. at
588 & n.12;  see also H.R. Rep. No. 413, 91st Cong., 1st Sess. Pt. 1,
at 35, 43 (1969).  An essential characteristic of the basic idea of
"public charity" that underlies charitable trust doctrine is the
concept of "uncertainty" or "indefiniteness" of beneficiaries.  This
Court stated in Russell v. Allen, 107 U.S. 163, 167 (1882), that
charitable trusts "may, and indeed must, be for the benefit of an
indefinite number of persons;  for if all the beneficiaries are
personally designated, (there is lacking) the essential element of
indefiniteness, which is one characteristic of a legal charity." See
also B. Hopkins, The Law of Tax-Exempt Organizations 72-73 (5th ed.
1987).  This principle of indefiniteness is well established in trust
law.  Section 375 of the Restatement (Second) on Trusts (1959)
provides:  "A trust is not a charitable trust if the persons who are
to benefit are not of a sufficiently large or indefinite class so that
the community is interested in the enforcement of the trust." See also
id. at Comments a, b, c, and d;  G. Bogert, The Law of Trusts and
Trustees Section 363 (1977);  4 A. Scott, The Law of Trusts Sections
364, 375 (1967).  /7/

   This concept of indefiniteness of beneficiaries as a characteristic
of public charity underlies the requirement that a contribution must
be made to a qualified organization in order to be deductible.
Organizations qualify for tax-exempt donations only if they promote
the public welfare according to the standards established by Congress;
 accordingly, donations to these organizations are statutorily
presumed to be dedicated to a public purpose in accordance with the
public charity concept that is at the root of Section 170.  On the
other hand, payments not made to or for the use of these
organizations, even if motivated by a benevolent intent to aid a needy
individual, do not meet the standards established by Congress for a
deduction.  If the payment is directed to a specific beneficiary, the
motive may be generous but it lacks the "indefiniteness" that
characterizes the type of "public charity" that Congress determined to
encourage in the Internal Revenue Code.  As the Tax Court explained in
denying a claimed deduction for a contribution made on the condition
that the money be used to benefit a particular individual:  "Charity
begins where certainty in beneficiaries ends, for it is the
uncertainty of the objects and not the mode of relieving them which
forms the essential element of charity.  * * * Whenever the
beneficiary is designated by name and his merit alone is to be
considered, the bequest is private and not public and ceases to have
the peculiar merit of a charity." Thomason v. Commissioner, 2 T.C.
441, 443-444 (1943);  see also Davis v. Commissioner, 55 T.C. 416,
424-425 (1970);  Davenport v. Commissioner, 34 T.C.M. (CCH) 1585, 1587
(1975).

   The rule limiting deductions to payments made "to or for the use
of" qualified organizations is also critical to the IRS's ability to
administer the charitable deduction provisions.  Because a charity can
lose its tax-exempt status if it permits funds placed under its
control to be spent for non-charitable purposes, it has a substantial
incentive to ensure that those funds are used as Congress intended.
/8/ To guarantee that tax-exempt organizations spend their funds in
furtherance of the public welfare, the IRS is empowered to audit their
affairs and records, and it may revoke an organization's tax
exemption, even retroactively, if the organization has acted
inappropriately.  /9/ The effect of requiring donations to be placed
under the control of a qualifying organization, viewed in the context
of this comprehensive administrative scheme, is to enable the IRS to
perform its oversight responsibilities by monitoring a relatively
limited number of recipients.  See Brinley v. Commissioner, 782 F.2d
1326, 1338 (5th Cir. 1986) (Hill, J., dissenting);  White v. United
States, 514 F. Supp. 1057, 1061 (D. Utah), rev'd, 725 F.2d 1269 (10th
Cir. 1984).

   The efficacy of this oversight system would be significantly
hampered if taxpayers could deduct payments made, allegedly for
charitable purposes, to individuals or private entities not recognized
by the IRS as qualified donees.  Instead of monitoring the activities
of a relatively circumscribed group of recognized charities, the IRS
could determine the validity of claimed charitable deductions only by
audits of enormous numbers of individual taxpayers.  Presumably, the
IRS would have to investigate the subjective motivations for privately
controlled gifts and the ultimate use made of funds given directly to
individuals.  Both the massive burden that this responsibility would
place on the IRS and the intrusive nature of the inquiry that would be
required to investigate charitable deduction claims strongly militate
against a departure from the system established in Section 170, which
permits the validity of a deduction to be determined largely from its
external features -- i.e., by ascertaining whether the payment was
made to a qualifying organization.  See Hernandez v. Commissioner, 109
S. Ct. at 2144;  United States v. American Bar Endowment, 477 U.S.
105, 118 (1986).  /10/

   2. Payments Withheld From The Control Of A Charitable Organization
By Earmarking Them To Benefit A Particular Individual Are Not
Deductible

   Although the statutory framework erected by Congress reflects the
concern that deductible contributions advance the public good, its
application also encompasses the situation where a charity ultimately
spends its money for a particular individual.  Obviously, many
charitable endeavors performed by qualified public charities, such as
aid to the needy or a scholarship award, eventually result in
expenditures for the benefit of a single person.  Where the ultimate
beneficiary is unknown to the person donating funds to the qualified
organization, the statutory system works properly.  It is clear that
deductibility furthers Congress's intent;  from the perspective of the
donor, the contribution is to an indefinite beneficiary and fully
accords with the notions of public charity that underlie Section 170.
If the individual beneficiary is known to the donor, however, and the
donation is earmarked for his benefit, allowing a deduction would run
counter to the "public charity" basis for the statutory design.  Where
Congress has determined that a taxpayer should not be permitted to
take a deduction for a gift to an individual, a taxpayer should not be
permitted to evade that determination by the mechanism of using a
qualified organization as a mere conduit for a payment intended to
benefit a particular individual.

   The courts and the IRS have grappled with the problems raised by
such situations and have agreed that payments to an individual
beneficiary cannot be rendered deductible simply by channeling the
payments through a qualified charity.  In 1962, the IRS issued Rev.
Rul. 62-113, 1962-2 C.B. 10, addressing the situation of expenses paid
to support missionaries.  The IRS ruled that a taxpayer can properly
deduct payments made to a church fund dedicated to the support of
missionaries, even if the son of the taxpayer is one of the
missionaries supported, so long as the taxpayer's donation is not
specifically earmarked for the use of that son.  The IRS explained the
governing principles as follows (1962-2 C.B. at 11):

         If contributions to the fund are earmarked by the donor for a
      particular individual, they are treated, in effect, as being
      gifts to the designated individual and are not deductible.
      However, a deduction will be allowable where it is established
      that a gift is intended by a donor for the use of the
      organization and not as a gift to an individual.

         The test in each case is whether the organization has full
      control of the donated funds, and discretion as to their use, so
      as to insure that they will be used to carry out its functions
      and purposes.

         In the instant case, the son's receipt of reimbursements from
      the fund is alone insufficient to require a holding that this
      test is not met.  Accordingly, unless the taxpayer's
      contributions to the fund are distinctly marked by him so that
      they may be used only for his son or are received by the fund
      pursuant to a commitment or understanding that they will be so
      used, they may be deducted * * * .

   See also Rev. Rul. 79-81, 1979-1 C.B. 107 ("donation" to college in
amount of required fee and listing name of student to whose account
donation could be applied is not deductible);  Rev. Rul. 68-484,
1968-2 C.B. 105 (payment to scholarship fund where university selects
recipient is deductible).

   The courts generally have looked to similar principles relating to
the organization's discretion and control over the funds when
considering the deductibility of "earmarked" payments to a qualified
donee.  Thus, in Tripp v. Commissioner, 337 F.2d 432, 435-436 (7th
Cir. 1964), the court held that a taxpayer's payments to a college
scholarship fund, which he had designated to finance the education of
a particular individual, were not deductible because they were "not to
a general scholarship fund to be used as the college saw fit but were
to be applied to the educational expenses of" the individual (id. at
436).  In Winn v. Commissioner, 595 F.2d 1060 (5th Cir. 1979), a
church sponsored several "days" to raise funds from the community to
pay the expenses of a missionary being sent overseas.  The court ruled
that donations made to the church for this purpose were deductible
because, inter alia, "an officer of the church took the funds donated
and dealt with them as the church wished" (id. at 1065).  In Peace v.
Commissioner, 43 T.C. 1, 7-8 (1964), the Tax Court considered the
issue of contributions made to a mission for the purpose of paying the
expenses of missionaries.  Citing approvingly the analysis of Rev.
Rul. 62-113, the court held that the contributions were deductible
because "(t)he mission had exclusive control * * * of both the
administration and distribution of the funds donated by the
(taxpayers)" (id. at 7).

   The principles developed in these earmarking cases have been
utilized by courts in considering the converse situation presented
here -- where a payment is made not to a charitable organization, but
directly to an individual, and the taxpayer argues that the payment
should be regarded as "to or for the use of" the organization because
of the individual's relationship to the organization.  If no deduction
is allowed for payments made "to" a qualifying organization that are
earmarked for the benefit of an individual, because the condition
attached to the payment prevents the organization from directing its
disposition, it logically follows, a fortiori, that payments made
directly to an individual cannot be deducted as "to or for the use of"
a qualified organization if the organization lacks discretion over the
disposition of the funds.  Accordingly, as the district court below
recognized (Pet. App. 23a-24a), the courts have consistently held
that, where a payment is made directly to an individual or for his
account, the payment cannot be regarded as "to or for the use of" an
organization unless the organization exercises control over the
disposition of the funds.  The prevailing rule was explained by the
Tax Court in Davenport v. Commissioner, 34 T.C.M. (CCH) 1585 (1975),
where the court disallowed a deduction claimed for amounts paid by the
taxpayer as rent for a house to be used by his son, the church's
minister.  The court stated (id. at 1587-1588):

         The cases are clear that the criteria for determining whether
      an amount is a charitable contribution is not whether the
      payment which is not made directly to the charity might
      incidentally relieve the charity of some cost but rather whether
      the payment is such that the contribution is "for the use of"
      the charity in a meaning similar to "in trust for." * * * (B)y
      making the payments directly to the landlord (the taxpayer) took
      the option of the (charity) with respect to its use of the
      funds.  As we have pointed out in several cases, the charity
      must have full control of the funds donated in order for a
      taxpayer to be entitled to a charitable deduction, and such is
      not the situation where the funds are designated by the donor
      for the use of a particular individual.  /11/

   This approach is rooted in the fundamental distinction drawn by
Congress between deductible "public" charity, which is directed at
indefinite beneficiaries, and nondeductible "private" charity.  Thus,
in Thomason v. Commissioner, supra, the court denied a deduction for
payments made to a school on behalf of an individual who was the legal
ward of a welfare society.  The taxpayer had claimed a deduction on
the theory that the payments relieved the society of a financial
burden, but the court concluded (2 T.C. at 444-445):  "The sums were
paid by petitioner for the benefit of a designated individual and for
no other individuals or for no other purpose of the society.  These
contributions may not be regarded as gifts to or for the society.
They were gifts to and for the benefit of this particular child and no
one else." /12/ See also McMillan v. Commissioner, 31 T.C. 1143,
1146-1147 (1959) (payments for expenses of child who was the
responsibility of adoption agency).  In sum, deduction of a
contribution to an individual, whether paid directly or through a
conduit, is inconsistent with the congressional design unless a
qualified donee is given discretion over the disposition of the funds.

   3. Petitioners' Direct Payments To Their Children For Living
Expenses Were Committed To The Control Of An Individual, Not The
Church, And Hence Are Not Deductible As Made "To Or For The Use Of"
The Church Under Section 170

   Under these principles, petitioners' claimed charitable
contributions clearly cannot be regarded as having been made "to or
for the use of" the Church within the meaning of Section 170.  The
payments were made directly to individuals for use in satisfying their
personal expenses -- food, shelter, and transportation.  /13/ Thus,
the payments were not dedicated to the use of the Church or some other
public purpose;  rather, they were dedicated to the primarily private
purpose of paying the personal expenses of the individual recipients.
/14/ Moreover, the individuals being supported here were petitioners'
own sons, the "natural objects of their bounty" (Davis v.
Commissioner, 55 T.C. at 424).  Thus, petitioners are seeking a tax
deduction for payments that they could be expected to make for their
own personal reasons even if the recipients had no relationship to a
charitable organization.  See Brinley v. Commissioner, 782 F.2d at
1338 (Hill, J., dissenting);  compare Orr v. United States, 343 F.2d
553, 557 (5th Cir. 1965) ("The words 'gift to or for the use of' will
not stretch to include payments which the taxpayer would have made for
non-charitable reasons.").  Indeed, the record shows that petitioners
were supporting Cecil before he began his missionary service (J.A.
15-16);  their contention that the continuation of this support was
transformed from a personal expense to a charitable contribution
because Cecil decided to leave school and serve as a missionary
stretches Section 170 well beyond its language and the apparent intent
of Congress.

   The payments here plainly did not satisfy the requirements
discussed above for establishing deductibility.  The Church never took
possession of the funds or had any opportunity to use them or to
exercise any discretion or control over how they would be spent.  The
district court found (Pet. App. 24a):

         (I)t is clear that the missionary sons had true "control"
      over the funds in question.  * * * The particular use to which
      the funds were put was solely within the power of the
      missionary.  * * * (T)he only role the church played in the
      distribution of the funds to the missionaries was to provide a
      projected budget range that would be needed for the particular
      area in which the missionary would be serving.  Beyond that
      information provided by the church, there is no indication that
      the church was involved in any way in controlling how the
      missionary's money was spent.

   Petitioners placed the funds directly into their sons' personal
bank accounts, and the sons were free to spend the money as they saw
fit.  Thus, as the court of appeals concluded, "the particular use to
which the funds were put was solely within the control of the
missionaries(;) * * * other than requiring the missionaries to submit
weekly reports of their expenses, the Church had no discretion over
the disposition of the funds" (id. at 9a).  Moreover, the Tax Court
unanimously reached the same conclusion on essentially identical facts
in its reviewed decision in Brinley v. Commissioner, 82 T.C. 932
(1984), rev'd, 782 F.2d 1326 (5th Cir. 1986), holding that "since the
funds were given directly to petitioners' son for his personal use and
could be expended by their son as he wished without accounting to
anyone, petitioners' contributions did not satisfy the control
requirement" (82 T.C. at 933) and hence were not deductible under
Section 170.  See also 82 T.C. at 939-941;  Brinley v. Commissioner
782 F.2d at 1339-1341 (Hill, J., dissenting).  In sum, whatever
petitioners' motivation, and notwithstanding any incidental benefit
enjoyed by the Church, petitioners' transfer of funds to the control
of their own children does not qualify as the kind of charitable
contribution for which Congress provided a deduction in Section 170.
/15/

   B. Petitioners' Novel And Exceedingly Broad Interpretations Of The
Phrase "To Or For The Use Of" Are Erroneous

   1. Section 170 Does Not Permit The Deduction Of Payments Made To
Individuals Simply Because The Payments Confer Some Benefit Upon A
Charitable Organization

   Petitioners contend (Br. 17-20, 23-24) that the phrase "for the use
of" connotes a common law "fiduciary relationship." Petitioners do not
use this term to refer to legal fiduciary relationships, such as
trusts or guardianships.  Rather, they contend that it extends to the
broad array of relationships in which one person is asked to "employ
(funds) in some manner for the benefit of a third person" (Pet. Br.
17) or, indeed, to "'those informal relations which exist wherever one
man trusts in or relies upon another'" (id. at 24).  Petitioners also
maintain that "the phrase 'for the use of' is often used
interchangeably with 'for the benefit of'" (ibid.).  Petitioners
conclude that Section 170 therefore permits a taxpayer to take a
deduction for payments made to individuals who have this kind of
informal fiduciary relationship with a qualified donee, so long as
"the contribution (is) made to a third party fiduciary in a manner
that will benefit a charitable organization" (Pet. Br. 24).  This
novel interpretation bears little relation to the text of Section 170
or to the intentions of its drafters.

   As this Court has emphasized on many occasions, the "'starting
point in every case involving construction of a statute is the
language itself'" (Landreth Timber Co. v. Landreth, 471 U.S. 681, 685
(1985), quoting Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723,
756 (1975) (Powell, J., concurring)).  See also United States v. Ron
Pair Enterprises, Inc., 109 S. Ct. 1026, 1030 (1989);  Watt v. Alaska,
451 U.S. 259, 265 (1981).  Petitioners' interpretation of Section 170
is not supported by the statutory text.  Indeed, petitioners
themselves acknowledge that their position does not reflect "the
ordinary meaning" of the phrase "for the use of" (see Pet. Br. 25
n.11).  The statutory phrase clearly contemplates that, at some point,
the charity will be able to "make use" of the donated funds.  But if
an organization has no authority over certain funds, it cannot "use"
them in the ordinary sense of the word.  See, e.g., Webster's Third
New International Dictionary 2523-2524 (1986) (primary synonyms for
"use" are "employ" or "utilize").  Consequently, if funds are
transferred to a third party under circumstances that will not
ultimately provide a charitable organization with discretion over
their disposition, the funds would not ordinarily be regarded as
having been given "for the use of" that organization.  See Peace v.
Commissioner, 43 T.C. at 7;  Thomason v. Commissioner, 2 T.C. at 444
("for the use of" connotes a "'right of exclusive appropriation or
enjoyment of the thing donated'").  /16/

   The legislative history of Section 170 makes clear that the phrase
"for the use of" was added for a relatively circumscribed purpose, not
to make a significant alteration in the existing statutory system that
made contributing "to" a qualified donee one of the fundamental
prerequisites for a deduction.  As we have noted (see page 11, supra),
the original predecessor of Section 170 had allowed deductions only
for contributions "to" charitable organizations, and the Bureau of
Internal Revenue had interpreted the statute to mean that deductions
could not be taken for payments made directly to trusts, community
chests, and other types of charitable foundations because those
organizations, although they served as conduits for contributions to
qualified charities, were not themselves qualified donees.  See O.D.
669, 3 C.B. 187 (1920).  In Rockefeller v. Commissioner, 676 F.2d 35,
40 (2d Cir. 1982), the Second Circuit described the organizations
adversely affected by the Bureau's ruling as follows:  "These
organizations were common law trusts;  legal title to the
contributions remained vested in a trustee which invested the funds
prior to disbursement to various charitable organizations." See also
Hearings on H.R. 8245 Before the Senate Comm. on Finance, 67th Cong.,
1st Sess. 531 (1921) (hereinafter Senate Hearings).

   When Congress was considering the Revenue Act of 1921,
representatives of these common law trusts sought legislative relief
from the Bureau's ruling.  In testimony before the Senate Finance
Committee, various representatives of these trusts argued that a
deduction should be allowed for payments made to the trusts because
they merely operated as "custodian(s)" of the funds until their
eventual disbursement to a qualified charity.  See Senate Hearings, at
521-526, 530-532.  /17/ The witnesses advised Congress that the
changes they sought were limited to expanding the statute to include
payments made directly to trustees or foundations.  /18/ And they
proposed legislation that would cure this difficulty by, inter alia,
inserting the phrase "for the use of" a qualifying organization.  See
id. at 526.

   Congress complied with the request of the trust representatives and
enacted Section 214(a)(11) of the Revenue Act of 1921, ch. 136, 42
Stat. 241, adding the phrase "or for the use of" to the predecessor of
Section 170.  The discussion of this change in the committee reports
and on the floor of Congress is sparse, but it indicates that Congress
did not regard this a major change in the statute, but rather one
calculated to alleviate the narrow concern expressed by the trust
representatives.  The House Report states simply that the section
"would allow the deduction, under proper restriction, of contributions
or gifts to a community chest fund or foundation" (H.R. Rep. No. 350,
67th Cong., 1st Sess. 12 (1921)).  See also S. Rep. No. 275, 67th
Cong., 1st Sess. 18 (1921).  And when asked on the floor of the House
to describe the effect of the change, one of the managers of the
legislation stated (61 Cong. Rec. 5294 (1921) (statement of Rep.
Green)):  "This somewhat enlarges it.  It does not make any very
material change.  It broadens it somewhat."

   The contemporaneous administrative and judicial interpretations
agreed that the new language had a relatively narrow scope, designed
to address the defect in the original statute with respect to
donations made to a trust for investment and eventual distribution to
charity.  Shortly after the statute was amended, the Treasury ruled on
the question whether a contribution to a volunteer fire company -- a
private, nonqualifying organization -- could be deducted as "for the
use of" the local municipality.  I.T. 1867, II-2 C.B. 155 (1923).
Stating that the "for the use of" language recently added to the
statute was "intended to convey a similar meaning as 'in trust for'"
(id. at 155), the Treasury concluded that the contribution was not
deductible.  /19/ The decision maintained that "the phrase 'for the
use of' seems to carry with it a right of exclusive appropriation or
enjoyment of the thing donated" (id. at 156).  See also, e.g., Rev.
Rul. 55-275, 1955-1 C.B. 295, 296;  I.T. 3707, 1945 C.B. 114.  And the
courts have also recognized on several occasions that the language
added in 1921 was intended to have a similar meaning to "in trust for"
-- to cover payments to an intermediary trust that ultimately will be
distributed to a charity.  See Rockefeller v. Commissioner, 676 F.2d
at 40;  Orr v. United States, 343 F.2d at 557-558;  Davenport v.
Commissioner, 34 T.C.M. (CCH) at 1587;  Thomason v. Commissioner, 2
T.C. at 444;  Danz v. Commissioner, 18 T.C. 454, 464 (1952), aff'd on
other grounds, 231 F.2d 673 (9th Cir. 1955), cert. denied, 352 U.S.
828 (1956);  Bowman v. Commissioner, 16 B.T.A. 1157, 1162-1164 (1929).

   Congress has also evinced its understanding of the relatively
narrow scope of the phrase "for the use of" in Section 170.  In the
1954 Code, Congress for the first time after 1921 made the distinction
between contributions "to" an organization and contributions "for the
use of" an organization significant in determining the amount of the
deduction.  Prior to 1954, an individual's charitable contributions
were limited (except in certain circumstances where unlimited
deductions were allowed) to 20% of his adjusted gross income.  In
1954, Congress permitted taxpayers to use an additional 10% of their
income for deductible contributions made "to" a charity, but this
enlargement of the ceiling expressly did not apply to contributions
made "for the use of" a charity.  In explaining this distinction, the
congressional committees noted that its effect would be to exclude
from the additional deduction "payments to a trust (where the
beneficiary is a (qualified organization))".  H.R. Rep. No. 1337, 83d
Cong., 2d Sess. A53 (1954);  S. Rep. No. 1622, 83d Cong., 2d Sess. 207
(1954).

   In 1964, Congress made another change yielding different tax
consequences for the two kinds of contributions;  it provided that
contributions "for the use of" a charity would no longer be eligible
for the unlimited deduction granted in certain circumstances by
Section 170(b)(1)(C).  On this occasion, Congress explained the
rationale for the distinction -- namely, to encourage contributions
that are transferred immediately to charity in contrast to
contributions to fiduciaries that are delayed before they find their
way to the qualified organization.  The Senate Report stated (S. Rep.
No. 830, 88th Cong., 2d Sess. 60 (1964)):

         Your committee believes that the special advantage of the
      unlimited charitable contribution deduction should not be made
      available in the case of these foundations because frequently
      contributions to foundations do not find their way into
      philanthropic endeavors for extended periods of time.

   See also H.R. Rep. No. 749, 88th Cong., 2d Sess. 53 (1964) ("These
* * * organizations frequently do not make contributions to the
operating philanthropic organizations for extended periods of time and
in the meanwhile use the funds for investment.").  Thus, Congress has
understood the term "for the use of" to refer to payments that, while
paid by the donor to a trust or similar entity instead of directly to
a qualified donee, will ultimately find their way to the control of a
qualified donee.

   In sum, the text, legislative history, and judicial and
administrative constructions of Section 170 all indicate that it was
never intended to permit the deduction of all payments that might in
any way benefit a charitable organization;  rather, the "for the use
of" language was designed to permit the current deduction of payments
to trusts or similar fiduciaries who receive payments from the donor
for eventual distribution to qualifying charities.  See, e.g.,
Rockefeller v. Commissioner, 676 F.2d at 41 ("for the use of" language
intended to apply to situations in which "contributions often do not
reach the charitable beneficiaries for a long period of time").  There
is no justification for stretching the statutory text to extend it to
transfers to "informal" fiduciaries who have no legal obligation to
manage and distribute the funds to the charitable beneficiary, or,
indeed, to anyone who proposes to use the funds in a way that will
confer a benefit upon some charitable organization (see Pet. Br. 24).
The courts below correctly concluded that Congress's insertion of the
phrase "for the use of" in Section 170 was not intended to discard the
fundamental requirement that deductible contributions be committed to
the control of a qualifying charity.  The statutory amendment merely
made the statute more flexible by permitting some delay between the
time a payment is deducted and the time that the funds are placed
within the control of a qualified recipient.  There is simply no basis
for concluding that Congress intended the words "for the use of" to
apply to a myriad of situations where, as here, donated funds never
come within the control of a qualifying organization.  /20/

   Petitioners' exceedingly broad interpretation of Section 170 --
covering any payment that can be viewed as "for the benefit of" a
charity -- plainly would extend the scope of the charitable
contribution deduction far beyond what Congress intended.  For
example, a taxpayer might regard tuition payments to a parochial
school as conferring a benefit upon the school by freeing up
scholarship funds for other students.  Or a taxpayer might claim a
deduction for payments to an indigent, taking the view that his
payments benefitted qualifying charities by relieving them of the cost
of providing food and shelter for that individual.  Or a taxpayer
might claim a deduction for the cost of living expenses provided to a
ward of a welfare society because it relieved the society of its
support obligation.  These types of payments, even though they might
incidentally benefit qualifying organizations, have long been held not
to be deductible.  See, e.g., Winters v. Commissioner, 468 F.2d 778
(2d Cir. 1972) (tuition payments);  Thomason v. Commissioner, supra
(support payments to ward);  Dohrmann v. Commissioner, supra (donation
to indigent).

   Indeed, petitioners' interpretation would appear to authorize
deductions for payments that heretofore no one has even suggested as
falling within the ambit of Section 170.  Many individuals work for
charitable organizations for relatively low salaries or as volunteers.
 If their parents contribute to their support, or give them money to
help purchase a car, is that contribution tax deductible?  Surely the
organization is benefitted if the parental support enables a valued
employee to continue working for the organization, rather than moving
on to a higher-paying job elsewhere.  Or suppose a college student
studying marine biology spends his summer as a volunteer with a group
that is working to preserve aquatic wildlife habitats.  Are the funds
that his parents send to him to defray his living expenses for the
summer deductible as "for the benefit of" some qualifying organization
dedicated to wildlife preservation?

   Indeed, one example closely analogous to the facts of this case
plainly demonstrates that petitioners' interpretation of Section 170
is erroneous.  Suppose a taxpayer recognizes a missionary on the
street and says:  "I admire the work that you are doing, and I would
like to help." The taxpayer then offers to treat the missionary to
dinner or, alternatively, gives him $10 that he spends on food.  If
the taxpayer had shown the same generosity to an indigent, the payment
clearly would not be deductible.  The payment should not be any more
deductible when it is a missionary, instead of an indigent, who is the
beneficiary of a free dinner, and there is no reason to suppose that
Congress intended such a result.  And when the taxpayer is not a
benevolent stranger, but rather is the missionary's own parents, the
argument for a deduction is even weaker.  In sum, petitioners'
position cannot be reconciled with one of the basic underpinnings of
the system erected by Congress -- namely, the advancement of "public
charity" by requiring tax-deductible contributions to be made "to or
for the use of" qualifying organizations, not individuals.  /21/

   2. The Church's Estimate Of A Missionary's Likely Expenses And Its
Review Of His Activities Do Not Establish "Control" Over The
Disposition Of His Personal Funds Sufficient To Justify A Deduction
For Payments That Parents Make To Their Missionary Children

   Petitioners also contend (Br. 25-27) that, to the extent Section
170 requires control by a charity as a prerequisite to deductibility,
that standard was satisfied here.  Relying on the court of appeals'
decision in Brinley v. Commissioner, supra, they maintain that the
Church exercises both "front-end" control over the funds, because the
claimed deduction is limited to the amount of mission expenses
estimated by the Church, and "back-end" control, because the
missionaries are required to submit periodic reports of their
activities, including the total amount of expenditures.  This
"extraordinary" (Pet. Br. 12) degree of control, petitioners argue,
ensures that the funds given to petitioners' sons "primarily serve()
the (Church's) own purposes" (id. at 26), and hence the payments
should be regarded as "for the use of" the Church.  This contention is
without merit.

   Sending a letter to prospective missionaries advising them of the
amount of expenses they can expect to incur during their service, even
if construed as a "request" to be forwarded to their parents for
assistance, hardly gives the Church any meaningful control over funds
transferred from parent to child.  The finding of the court below that
"the particular use to which the funds were put was solely within the
control of the missionaries(;) * * * the Church had no discretion over
the disposition of the funds" (Pet. App. 9a;  see also id. at 24a) is
unaffected by this asserted "front-end control." At most, the Church's
letter provides evidence that the payments for which deductions are
claimed were not intended to be frittered away on luxuries.  Unless
the Code provides a deduction, however, for all payments to
individuals who work for charitable organizations and do not live a
lavish lifestyle -- which it clearly does not -- the Church's letter
adds nothing to petitioners' argument for deductibility.  /22/

   The hypotheticals discussed earlier (at 30-32) would not be
materially altered if they included a letter analogous to the ones
sent by the Church to the prospective missionaries in this case.  If
the organization sponsoring the project to preserve aquatic habitats
advised the taxpayer's son of his estimated expenses for the summer,
the taxpayer's support payment would not become deductible.  If a
charitable organization offered someone an office job at a salary of
$8,000 and noted in the letter that a comparable job at a
profit-making institution would pay $12,000, the prospective
employee's parents would not be entitled to a $4,000 tax deduction if
they agreed to make up the difference so as to enable their child to
work for the charitable organization.  /23/ The result should be the
same here.

   Petitioners' assertion of "back-end" control is no more persuasive.
 Missionaries are required to submit weekly reports to Church
officials in which they state the total amount of their expenditures
for the week.  See Pet. App. 44a.  Thus, after funds have been
transferred from parent to son and then spent at the discretion of the
son, a Church official is informed that the money has been spent;  the
expenditures are not itemized on the reports so he does not learn how
the money has been spent.  Plainly, this superficial post hoc
reporting procedure does not give the Church control over the
expenditure of the funds;  it simply helps the Church monitor
compliance with its policy that missionaries should live frugally.
The only actual "back-end control" claimed by the Church is not over
the funds, but over the mission itself;  the Church assertedly retains
the option of cancelling the mission if Church officials determine
that the missionary is violating Church policy in financial matters
(see Pet. Br. 7 n.1).  But this threat (similar to a university's
retention of power to expel a student) has nothing to do with the only
basis for petitioners' claim of a tax deduction -- that they have made
a contribution "to or for the use of" the Church.  If a taxpayer makes
a deductible contribution to a qualified organization, he does not
lose that deduction if it develops that the organization was not
complying with the conditions of its exemption and has its tax-exempt
status revoked for the year in which the contributions were made.  See
26 C.F.R. 601.201 (n)(3)(iii).  Thus, if petitioners' payments to
their children were "to or for the use of" the Church when made,
petitioners would appear to be entitled to a deduction under their
theory regardless of how the funds ultimately were spent or misspent
by the missionaries.

   In short, petitioners' "control" argument adds little to their
basic contention that parents' payments of their children's living
expenses during missionary service are deductible because the support
of missionaries benefits the Church.  This argument must fail.
Payments earmarked for the use of a particular individual or paid
directly to that individual are not deductible because the beneficiary
of the contribution is not indefinite or uncertain, even if the
payments indirectly benefit a qualified charity.  As Judge Hill stated
in his dissent in Brinley in rejecting petitioners' "front-end
control" analysis (782 F.2d at 1340):

         Such a holding simply ignores the basic thesis that a
      contribution made with the intent to favor a particular
      individual, whether earmarked in a contribution to a charity or
      made to the individual directly, lacks the indefiniteness that
      qualifies it as a charitable contribution.  The contribution
      made by the Brinleys simply does not meet the eligibility
      requirements for deductibility under a proper application of the
      control test.

   See also White v. United States, 514 F. Supp. 1057, 1060-1061 (D.
Utah), rev'd, 725 F.2d 1269 (10th Cir. 1984).

   3. The Payments In Question Are Not Deductible On The Theory That
They Were Made "To" The Church Because Petitioners' Sons Were Acting
As "Agents" Of The Church In Accepting The Payments And Spending The
Funds On Their Own Living Expenses

   Petitioners contend (Br. 38-42) for the first time in this Court
that their sons were "agents" of the Church for the purpose of
receiving and spending contributions for their living expenses, and
therefore the payments in question were made "to" the Church.  Because
this contention was not raised below, its factual underpinnings were
not explored in the district court;  petitioners suggest (Br. 39) that
the sons' status as agents is firmly established by an internal
document of the Church introduced as an appendix to the Church's
amicus brief in this Court.  In fact, the record is clear that "(t)he
Church does not want missionaries to receive missionary expense money
or other charitable contributions from third parties other than those
(usually the family) whom the Church has requested to provide
financial assistance" (Pet. App. 33a;  J.A. 13).  Thus, petitioners'
contention apparently is not that their sons were agents of the Church
for purposes of collecting contributions to the Church, but rather
that they were agents only for the limited purpose of receiving money
from their parents and spending it.

   In any event, even if petitioners' factual assumptions about their
sons' status as agents are correct, their claim for a Section 170
deduction is not enhanced.  As we have noted (pages 17-19, supra), the
courts have consistently upheld the Commissioner's position that "(i)f
contributions to (a qualified donee) are earmarked by the donor for a
particular individual, they are treated, in effect, as being gifts to
the designated individual and are not deductible." Rev. Rul. 62-113,
supra.  Tuition is, of course, the paradigm example;  it does not
become deductible by being paid in the form of an earmarked
contribution to a scholarship fund.  Although petitioners appear to
disagree with this line of authority, suggesting that their support
payments clearly would have been deductible if they had been made
directly to the Church with the proviso that the funds be remitted to
their children (see Pet. Br. 40, 44), that position is untenable.  The
distinction between public and private generosity embodied in Section
170 would be eviscerated if a payment could be rendered deductible by
the expedient of using a qualified donee as a mere conduit for the
transfer of funds from the donor to an individual recipient.  But all
that petitioners' agency argument can accomplish is the creation of
such a conduit.  If petitioners gave funds to an "agent" of the Church
(their missionary son) earmarked for the specific purpose of paying
the living expenses of their missionary son, the case would be no
different from one in which they gave the funds directly to their
missionary son for that purpose (which is in fact what happened).
/24/ The question remains whether that payment for their son's support
is deductible as "for the use of" the Church because it confers some
benefit on the Church.  As we have explained, the payment is not
deductible because the individual donee, not the Church, exercises
discretion over the use of the funds.  Under the system established by
Congress for ensuring that deductible contributions advance a public
purpose, such a payment to the control of an individual beneficiary is
not deductible.  /25/

   C. Petitioners' Payments To Support Their Children Are Not
Deductible As "Unreimbursed Expenditures" Within The Meaning Of Treas.
Reg. Section 1.170A-1(g)

   From the earliest days of the provision allowing a deduction for
charitable contributions, it has been understood that no deduction is
allowable for contributions of services.  See O.D. 712, 3 C.B. 188
(1920).  At the same time, however, the courts recognized that
individuals who rendered services to charitable organizations were
entitled to deduct the amount of certain expenses, such as travel
expenses, that they incurred out-of-pocket in connection with
rendition of services to charity.  See, e.g., Wolfe v. McCaughn, 5 F.
Supp. 407 (E.D. Pa. 1933);  Upham v. Commissioner, 16 B.T.A. 950
(1929);  Shutter v. Commissioner, 2 B.T.A. 23 (1925).  This rule
subsequently was embodied by the Commissioner in a formal regulation,
Treas. Reg. Section 1.170A-1(g), which provides, in pertinent part, as
follows:

         Contributions of services.  No deduction is allowable under
      section 170 for a contribution of services.  However,
      unreimbursed expenditures made incident to the rendition of
      services to an organization contributions to which are
      deductible may constitute a deductible contribution.  For
      example, the cost of a uniform without general utility which is
      required to be worn in performing donated services is
      deductible.  Similarly, out-of-pocket transportation expenses
      necessarily incurred in performing donated services are
      deductible.  Reasonable expenditures for meals and lodging
      necessarily incurred while away from home in the course of
      performing donated services also are deductible.

   The courts have consistently interpreted this regulation as
permitting a deduction only when the expenses primarily benefit the
charity, rather than the taxpayer.  See, e.g., Babilonia v.
Commissioner, 681 F.2d 678, 679 (9th Cir. 1982);  Brinley v.
Commissioner, 82 T.C. at 936-937.  Relying primarily on the Tenth
Circuit's decision in White v. United States, supra, petitioners argue
(Br. 30-37) that their payments to support their sons are
"unreimbursed expenditures" deductible under this regulation.

   The court of appeals correctly rejected this contention on the
ground that Treas. Reg. Section 1.170A-1(g) does not authorize a
deduction for unreimbursed expenses by anyone other than the taxpayer
who actually renders the services to the qualified charity (see Pet.
App. 10a-14a).  The text and structure of the regulation clearly
indicate that it permits a deduction only by the taxpayer who both
incurs the expense and performs the service.  See Brinley v.
Commissioner, 82 T.C. at 938.  The deduction allowed by the regulation
is expressed as an exception to the general rule stated in the first
sentence -- that no deduction is allowed for a contribution of
services.  Obviously, this first sentence refers to the taxpayer's own
contribution of services.  Accordingly, the exception to this general
rule to permit the deduction of certain expenses incurred incident to
the rendition of services also refers to services rendered by the
taxpayer.

   Moreover, the language detailing the kind of expenses that may be
deducted confirms this conclusion.  Deductible expenditures for
clothing must relate to articles worn "in performing donated
services," transportation expenses must be "out-of-pocket" and
"necessarily incurred in performing donated services," and meals and
lodging expenses must be "necessarily incurred while away from home in
the course of performing donated services." Each of these descriptions
clearly envisions that the person entitled to the deduction is the one
actually performing the donated services.  If parents contribute funds
to the support of their child, and the child uses those funds to cover
expenses incurred in rendering services to a charity, the parents have
no more incurred an "unreimbursed expenditure" than would the child's
employer, if the child's expenses had been paid with money he received
as wages.  Compare Deputy v. du Pont, 308 U.S. 488, 493-494 (1940).
/26/

   The Commissioner's interpretation of his own regulation, of course,
is entitled to considerable deference.  See Jewett v. Commissioner,
455 U.S. 305, 318 (1982).  Moreover, the other relevant guides to the
interpretation of Treas. Reg. Section 1.170A-1(g) all confirm that it
does not allow a taxpayer to deduct expenses incurred by another
individual in connection with the latter's services to charity.  The
revenue ruling that was the precursor to the regulation clearly
identified the taxpayer as the one providing the services to charity.
The ruling stated (Rev. Rul. 55-4, 1955-1 C.B. 291):  "A taxpayer who
gives his services gratuitously to an association * * * and who incurs
unreimbursed traveling expenses * * * may deduct the amount of such
unreimbursed expenses in computing his net income * * * ." See also
Rev. Rul. 58-240, 1958-1 C.B. 141;  Rev. Rul. 56-508, 1956-2 C.B. 126,
128-129.  Congress has evinced the same understanding of Treas. Reg.
Section 1.170A-1(g).  Section 142(d) of the Tax Reform Act of 1986,
Pub. L. No. 99-514, 100 Stat. 2120, imposed limitations on the
deductibility under Section 170 of unreimbursed travel expenses.  The
portion of the House Report addressed to this provision explained
existing law as follows (H.R. Rep. No. 426, 99th Cong., 1st Sess. 119
(1985) (emphasis added)):  "A taxpayer may deduct, as charitable
donations, unreimbursed out-of-pocket expenses incurred incident to
the rendition of services provided by the taxpayer to a charitable
organization (Treas. Reg. Sec. 1.170A-1(g))." /27/ And, as the Tax
Court noted in Brinley, with the exception of the two recent court of
appeals cases involving the same factual context as this one, the case
law under Treas. Reg. Section 1.170A-1(g) uniformly "has involved
taxpayers incurring unreimbursed expenses incident to the rendition of
services to a charity by those same taxpayers" (82 T.C. at 938).  /28/

   Thus, to the extent (if any) that the expenses incurred by
petitioners' sons in performing their missionary services for the
Church may be within the ambit of Treas. Reg. Section 1.170A-1(g),
they can be deducted only by the sons themselves, not by petitioners.
/29/ It is fundamental that, in the absence of a special provision to
the contrary (such as one permitting joint returns), individual
members of a family are separate taxpayers, each with his own income
and deductions.  See I.R.C. Section 7701(a)(14);  Treas. Reg. Section
1.6012-1(a)(4).  Petitioners' interpretation of the regulation would
permit the unreimbersed expense deductions (if any) to be shifted from
the sons to the parents -- who can obtain a greater tax advantage from
the deductions because they are in a higher income tax bracket.  Any
such assignment or shifting of deductions has long been rejected by
this Court.  See Magruder v. Supplee, 316 U.S. 394, 396 (1942) (taxes
deductible only by person upon whom they are imposed);  Deputy v. du
Pont, 308 U.S. at 493-494 (stockholder's payment of corporation's
obligation not deductible as business expense).  Thus, whatever
deductions might have been claimed by Benjamin and Cecil for the
expenses incurred during their missionary service, petitioners cannot
themselves qualify for deductions generated by their sons' service to
the Church and attendant expenditures.  See Note, Charitable
Deductions for Missionary Support:  Conflict Between White and
Brinley, 5 Va. Tax Rev. at 219-220.

   Apart from the problem of deduction shifting, the court below
correctly noted (see Pet. App. 10a-11a) that petitioners'
interpretation of Treas. Reg. Section 1.170A-1(g) would provide an
opportunity for forms of "taxpayer abuses" that would impose a
"significant (enforcement) burden" on the IRS (Pet. App. 10a).  There
would be risk of a double deduction for a single expenditure if the
parents could claim a deduction for their payments and the missionary
child who actually incurs the expenses (and therefore is entitled to
any applicable deduction under the plain meaning of the regulation)
also claims them as deductible.  Moreover, petitioners' interpretation
would afford an opportunity for taxpayers to "anticipate" deductions,
i.e., shift them into earlier years, by having the parent make support
payments to the child in a tax year preceding the actual expenditure
of the funds.  And examination of the validity of a taxpayer's claimed
deductions under this theory would necessarily entail an intrusive
inquiry into the records of a third party;  only by examining the
expenditures of the child could the IRS determine whether the parents'
payments were applied to expenses that fall within the ambit of the
regulation.  See also Brinley v. Commissioner, 782 F.2d at 1337-1338
(Hill, J. dissenting);  Note, supra, 83 Mich. L. Rev. at 1434-1435.

   For all these reasons, the court of appeals correctly concluded
that Treas. Reg. Section 1.170A-1(g) provides no basis for a tax
deduction claim by parents for funds that they transfer to their
children to be used for living expenses.  /30/

                              CONCLUSION

   The judgment of the court of appeals should be affirmed.

   Respectfully submitted.

   KENNETH W. STARR

      Solicitor General

   SHIRLEY D. PETERSON

      Assistant Attorney General

   LAWRENCE G. WALLACE

      Deputy Solicitor General

   ALAN I. HOROWITZ

      Assistant to the Solicitor General

   DAVID I. PINCUS

   FRANCIS M. ALLEGRA

      Attorneys

   FEBRUARY 1990

   /1/ Unless otherwise noted, statutory references are to the
Internal Revenue Code of 1954 (26 U.S.C.), as amended (the Code or
I.R.C.).

   /2/ The effect of the change for 1980 was to reduce the claimed
deduction by $255, from $3,481 to $3,126.  For 1981, the effect was to
increase the total claimed deduction from $4,882 to $5,653.  (It
appears that petitioners failed to include support payments made to
Cecil in the deduction claimed on their first amended return for
1981.) Petitioners contended that they were entitled both to claim an
exemption for Cecil as a dependent for 1981 and to take a charitable
contribution deduction for support payments made to him during his
missionary service in that year.  The rationale given for this
treatment was that petitioners had paid more for Cecil's support
during the first part of 1981, during which he was a student at
Brigham Young University, than they had paid for his support during
his missionary service in the latter part of that year;  accordingly,
petitioners maintained, even if the support payments for which
deductions were claimed were excluded, petitioners had still paid more
than half of Cecil's suport for the taxable year and were entitled to
claim him as a dependent.  See Exhibits E and F to the United States'
Statement of Material Fact;  see also J.A. 15-16.

   /3/ The IRS publishes a list of organizations that qualify for
tax-deductible contributions.  The Church is included on this list, as
it was at the time of the payments at issue.  See Pet. App. 39a;  IRS
Publication No. 78, Cumulative List of Organizations 276 (1989).

   /4/ The legislative history of the 1921 amendment indicates that
the phrase "for the use of" was added for the specific purpose of
overturning this Treasury decision, and that it was not intended to
effect a significant change in the statute.  See 61 Cong. Rec. 5294
(1921) (amendment not "very material") (statement of Rep. Green);  see
generally pages 25-27, infra;  J. Seidman, Legislative History of
Federal Income Tax Laws (1939-1861) 838 (1938).  Accordingly, the
added phrase has been construed "as intended to convey a meaning
similar to 'in trust for'" (Thomason v. Commissioner, 2 T.C. 441, 444
(1943)).  The 1921 amendment also added the phrase "or community
chest, fund, or foundation" to the description of organizations
eligible to receive tax-deductible contributions.

   /5/ The government's summary judgment motion rested on the argument
that the payments in question here were not made "to or for the use
of" a qualified organization;  the government did not there dispute
that petitioners' payments constituted "contributions or gifts" within
the meaning of the statute.  In the event that the district court's
grant of summary judgment is reversed, the question whether
petitioners' payments for the living expenses of their children are
"contributions or gifts" will remain open in any subsequent
proceedings that may be necessary.

   /6/ This concept accords with the commonly understood "legal
meaning" of "charity." See Kain v. Gibboney, 101 U.S. 362, 365 (1879)
("Charity is generally defined as a gift for public use.  Such is its
legal meaning.");  Perin v. Carey, 65 U.S. (24 How.) 465, 506 (1860)
("(C)harity is a gift to a general public use.").

   /7/ Moreover, the Solicitor of Internal Revenue specifically looked
to the law of charitable trusts in giving an early interpretation of
the charitable deduction provisions of the Code;  he stated that "'(a)
gift is a public charity when there is a benefit to be conferred on
the public at large, or some portion thereof, or upon an indefinite
class of persons.'" Sol. Op. 159, III-1 C.B. 480, 482 (1924);  see Bob
Jones University v. United States, 461 U.S. at 590 n.15.

   /8/ See Shaller, Tax Exemption of Charitable Organizations and the
Deductibility of Charitable Donations:  Dangerous New Tests, 8 U.
Bridgeport L. Rev. 77, 95 (1987) ("Because a qualified donee is
already under scrutiny by the I.R.S., there is a greater likelihood
that funds disbursed by these organizations will be used for exempt
purposes.").

   /9/ See 26 C.F.R. 601.201(n)(6);  B. Hopkins, The Law of Tax-Exempt
Organizations 639-664 (5th ed. 1987).  See generally S. Rep. No. 552,
91st Cong., 1st Sess. 52 (1969) (discussing the IRS's oversight
responsibilities).

   /10/ The commentators have adverted to the severe administrative
difficulties that would be posed by departing from the qualified donee
system.  One commentator observed:

         The presence of the section 501 exemption and the section 170
      deduction suggests a rationale for extending a * * * deduction
      to the taxpayer who gives cash or other property directly to a
      person likely to qualify for benefits from public charity.  Why
      the tax system does not allow such a deduction * * * may more
      reflect administrative considerations and concerns about abuse
      and evasion than any theoretical or policy notions about
      subsidies and incentives.  The Service would have difficulty
      distinguishing deductible private charitable gifts from
      nondeductible family support or transfers, sometimes made with
      the implicit or explicit expectation of some reciprocal
      benefits.

   McNulty, Public Policy and Private Charity:  A Tax Policy
Perspective, 3 Va. Tax Rev. 229, 235 (1984);  see also Note, Does
Charity Begin at Home?  The Tax Status of a Payment to an Individual
as a Charitable Deduction, 83 Mich. L. Rev. 1428, 1441 (1985) ("Rather
than burden the IRS with case-by-case inquiries into taxpayer motive
and ultimate benefit, administrative considerations favor requiring
that expense donations be sent directly to the qualified
organization.")

   /11/ The Tax Court repeatedly has rejected similar efforts to
deduct payments made directly to missionaries or other individuals to
pay their expenses, because of the organization's lack of control over
the disposition of the funds.  See Diab v. Commissioner, 39 T.C.M.
(CCH) 561, 567 (1979), aff'd, 688 F.2d 842 (7th Cir. 1982) (deductions
for payments to individuals disallowed because funds were not placed
"under the direct control" of the organization);  Cook v.
Commissioner, 37 T.C.M. (CCH) 771, 774 (1978) (support payments made
directly to ministers not deductible because the funds were not "under
the direct control of" the organizations);  Mayo v. Commissioner, 30
T.C.M. (CCH) 505, 507 (1971) (donation made directly to two Mennonite
missionaries not deductible because not made "through established
Mennonite organizational channels").

   /12/ By contrast, the court stated that, "if an exempt organization
incurs liabilities in the general performance of its functions and
requests its donors to pay their contributions to its creditors, the
payments would be 'for the use of' the charity" (2 T.C. at 444).

   /13/ As a general rule, the Code does not permit the deduction of
personal expenses.  See I.R.C. Section 262 ("Except as otherwise
expressly provided in this chapter, no deduction shall be allowed for
personal, living or family expenses").

   /14/ This is not to say that the payments in no way serve a public
purpose.  Petitioners' children were serving as missionaries of the
Church, and therefore payments for their support were to some extent
in furtherance of the Church's goals that have been recognized as
serving a public, charitable purpose.  If paid by the Church, such
payments to support individual missionaries would be fully in accord
with the Church's tax-exempt status.  But the payment of funds to an
individual to be spent on his personal living expenses directly and
predominantly serves the individual's private purposes.  The situation
is analogous to a salary paid to an employee of a charitable
organization.  The payments are made directly for the personal benefit
of the individual, but they indirectly benefit the charity -- and
further its public purposes -- because the employee's services assist
the charity in its mission and the employee will not provide those
services unless he is paid a salary on which he can live.  Similarly
here, the support payments to the missionaries directly confer a
private, personal benefit upon them -- by enabling them to obtain
food, lodging, and other necessities;  the payments confer a more
attenuated benefit upon the Church by making it possible for the
missionaries to conduct their work.

   /15/ The commentators generally have agreed with the position
adopted by the court below, criticizing those decisions that have
allowed deductions for payments to support the taxpayer's child during
his missionary service.  See Shaller, supra;  Blasi & Denesha,
Avoiding Disallowance of Earmarked Charitable Contributions, 9 Rev. of
Tax'n of Individuals 160, 169-170 (1985);  Note, Charitable Deductions
for Missionary Support:  Conflict Between White and Brinley, 5 Va.
Tax. Rev. 203 (1985);  Note, Does Charity Begin at Home?  The Tax
Status of a Payment to an Individual as a Charitable Deduction, 83
Mich. L. Rev. 1428 (1985);  Note, White v. United States:  Tenth
Circuit Allows Parents "Charitable Contribution" Deduction for Support
Payments Made Directly to Mormon Missionary Son, 62 Den. U.L. Rev. 331
(1984);  but see Note, A Tax Deduction for Direct Charitable
Transfers:  The Case Against Davis v. United States, 64 Wash. L. Rev.
935 (1989);  Note, Earmarked Charitable Contributions:  In Search of a
Standard, 50 Mo. L. Rev. 918 (1983).

   /16/ Petitioners cite (Br. 17 n.3) several cases construing the
phrase "for the use of" in contracts or other documents as creating
third party beneficiary rights.  These decisions in no way suggest,
however, that the phrase should be interpreted as meaning "for the
benefit of" in Section 170 or any other statute.  In contrast to these
decisions construing contractual language in favor of third party
beneficiaries, in Wagner v. United States, 573 F.2d 447 (7th Cir.
1978), the court held that an Indiana statute's reference to trusts
"for the use of" a debtor connoted actual control and applied only to
trusts in which the debtor could determine how the corpus would be
spent.  See also Chartwell Communications Group v. Westbrook, 637 F.2d
459, 465 (6th Cir. 1980) (construing the phrase "for the use of" in
Section 605 of the Communications Act of 1934, 47 U.S.C. 605).

   /17/ Mr. Garfield, testifying on behalf of the Cleveland
Foundation, explained his position as follows (Senate Hearings, at
524):

         The point where we found difficulty under the present statute
      was that the Internal Revenue Office held that a foundation did
      not come within the definition of a corporation or association
      organized and operated exclusively for charity, for the reason
      that a trust company was nominated as the trustee to hold the
      title.  However, the trust company, as trustee, simply holds
      these funds and derives no pecuniary advantage other than the
      charge made for the actual handling of the funds:  it is merely
      the custodian for investment and reinvestment;  it derives no
      pecuniary advantage by reason of such relationship.  It is in
      exactly the same situation that a trust company would be in if a
      college turns over to the trust company its funds for investment
      and handling, which is often done.  It does not change the
      character of the fund, but the college employs a certain bank or
      trust company to administer and hold its fund subject the orders
      of its officers.

   /18/ William Greenough, representing the New York Community Trust,
testified as follows (Senate Hearings, at 530):

         Our whole request here is that the sections of the income tax
      be made harmonious with this provision (of the estate tax
      allowing deductions for gifts not only to corporations organized
      for charitable purposes but also to trustees for similar
      purposes).  * * * That in itself is absolutely all we are asking
      for.

   /19/ The Treasury decision explained (II-2 C.B. at 155):

         "(T)he contribution is made to a private corporation, to be
      used by that corporation, although for the benefit of the
      inhabitants of the municipal corporation.  The donation is not
      for the use of such inhabitants, but for their benefit, and
      clearly it cannot be claimed that it is for the use of the
      municipal corporation * * * .  It does not appear that the
      municipality in any way has any control over the property of the
      incorporated volunteer fire company or that it has any voice in
      the manner in which such property should be used."

   /20/ Petitioners devote considerable effort (see Br. 11, 16-23,
27-28) to demolishing a "straw man" -- the idea that the court of
appeals held that a contribution is deductible only if the taxpayer
transfers it to the "actual possession" of a qualified donee.  The
court of appeals never formulated such a holding;  its opinion
acknowledged what is apparent from the face of the statute -- that
Section 170 covers some transfers that are not made directly "to" the
actual possession of a qualified donee.  See Pet. App. 9a.  The court
of appeals recognized, however, that the 1921 amendment was designed
to build on the scheme established by Congress that had required
transfer "to" a qualified donee by broadening the statute to cover
other transactions that are closely analogous to such direct
transfers, such as payments to a trust for eventual distribution to a
charity.  Contrary to petitioners' submission, that amendment did not
create an entirely new scheme that authorized deductions for payments
bearing no similarity to transfers to qualified donees.

   /21/ Petitioners seek to justify their expansive interpretation of
the phrase "for the use of" by invoking an alleged rule of
construction that Section 170 is to be "broadly construed in favor of
the taxpayer" (Pet. Br. 15) or read "favorably to the taxpayer" (id.
at 27, 42).  The case that petitioners cite for this proposition (Br.
14), Helvering v. Bliss, 293 U.S. 144, 151 (1934), however, merely
states that the charitable contribution deduction provision should
"not * * * be narrowly construed" because it is motivated by "public
policy" considerations.  This statement does not suggest a general
principle of construing the provisions "in favor of the taxpayer,"
especially in light of this Court's repeated admonition that
deductions should not be allowed except to the extent "there is a
clear provision therefor" (Commissioner v. National Alfalfa
Dehydrating & Milling Co., 417 U.S. at 149).  Moreover, since
petitioners' interpretation of the statute does not further the public
policy considerations that underlie Section 170 (see pages 12-15,
supra) because it facilitates the deduction of payments made to an
individual, this observation by the Court in Bliss provides little
support for petitioners' statutory construction.  In any event, the
decision of the courts below rejecting petitioners' claimed deduction
does not rest on a "narrow construction" of Section 170.  Rather, it
is compelled by the plain meaning of the text and the relevant indicia
of legislative intent.  Compare Better Business Bureau v. United
States, 326 U.S. 279, 283 (1945).

   /22/ The amount estimated by the Church in this case for an
appropriate level of expenses plainly cannot be the final word on
deductibility under Section 170.  For example, suppose another
denomination with a missionary program similar to that of the Church
determined that its missionaries should receive a modest stipend --
approximating the salary of a clerical worker -- and therefore sent
its missionaries a letter estimating their expenses for one year in
New York at $25,000.  Petitioners' theory would suggest that parents
supporting their missionary child would be entitled to a $25,000
deduction;  certainly their deduction would not be limited by the
estimate made by the Church in this case.  Moreover, suppose a third
denomination sent its missionaries a letter requesting them to raise
funds for their own support, but not specifying a particular figure.
If the parents of one of those missionaries paid him $20,000 in
support payments, could the IRS reasonably disallow a deduction for
that amount, while allowing the $25,000 deduction in the previous
example?  Thus, the Church's letter providing the estimate has no
proper bearing on the question of deductibility.

   /23/ Indeed, it is not necessary to hypothesize such a letter.  A
successful applicant to a university typically receives a letter
notifying him that he has been accepted and providing an estimate of
the expenses (tuition, room and board, books, etc.) that he will incur
during the school year.  If a parent gives the college student the
funds to cover these estimated expenses, thereby relieving the
university of the need to provide any financial assistance, the
acceptance letter does not confer upon the parent the right to a
charitable deduction under Section 170.

   /24/ Indeed, even the court of appeals in Brinley, which ruled in
favor of the taxpayer, recognized that the argument that the
missionaries are limited agents of the Church is of little
significance.  The court stated that the argument "raises 'form over
substance' and deviates from the real inquiry:  whether the LDS Church
had control over the funds and, therefore, discretion as to their use"
(782 F.2d at 1335).  See also the Tax Court's opinion in Brinley, 82
T.C. at 940-941.

   /25/ This system does not reflect congressional disapproval of
private charity, only the conclusion that the public should not
subsidize that kind of generosity.  The decision of the court of
appeals thus does not "force" (Pet. Br. 45) the Church to abandon its
traditional way of administering its missionary program.  On the
contrary, the Church is free to continue to run the program according
to its 160-year tradition, relying on the generosity of its members to
their children.  Taking a tax deduction for payments to support one's
child during his mission is not a part of that longstanding tradition.
 The notion that such payments could be deductible is of fairly recent
vintage;  indeed, petitioners did not even claim the deduction on
their original return filed in 1981.

   /26/ The Tax Court has consistently held that a taxpayer may not
take a deduction for providing funds for a contribution actually made
by another.  See, e.g., Herring v. Commissioner, 66 T.C. 308, 312
(1976);  Wilson v. Commissioner, 11 T.C.M. (CCH) 159, 161 (1952).

   /27/ See also Staff of the Joint Comm. on Taxation, 99th Cong., 2d
Sess., General Explanation of the Tax Reform Act of 1986, at 59 (Joint
Comm. Print 1987) (deduction available where "services provided by the
taxpayer");  Staff of the Joint Comm. on Taxation, 98th Cong., 2d
Sess., General Explanation of the Revenue Provisions of the Deficit
Reduction Act of 1984, at 1133 (Joint Comm. Print 1984) (deductible
out-of-pocket expenses are those "incurred by a taxpayer in rendering
services").

   /28/ Petitioners cite (Br. 36) three cases to support their
contention that "unreimbursed expenses" may be deducted by a person
other than the one who renders the services to the charity, Smith v.
Commissioner, 60 T.C. 988, 994 (1973);  McCollum v. Commissioner, 37
T.C.M. (CCH) 1817 (1978);  and Rockefeller v. Commissioner, supra.
None of these cases stands for this proposition.  In both Smith and
McCollum, the parents themselves contributed services and were
assisted by their young children.  Hence, most of the expenses were
incurred by the taxpayers incident to services that they themselves
rendered;  it does not appear in either case that the court's
attention was called to the fact that a small portion of the expenses
was attributable to persons other than the taxpayers.  See Smith, 60
T.C. at 990-991;  McCollum, 37 T.C.M. (CCH) at 1818-1819;  see
generally Brinley v. Commissioner, 782 F.2d at 1338 n.5 (Hill, J.,
dissenting).  In Rockefeller, the issue was whether the deductions
were "to" or "for the use of" the charity, which affected whether the
taxpayers qualified under then-existing provisions for unlimited
charitable deductions;  the court held that the deductions were "to"
the charity.  The court therefore had no occasion to construe Treas.
Reg. Section 1.170A-1(g).  The taxpayers' philanthropic activities in
Rockefeller included the provision of services to various charitable
organizations;  in connection with rendering these services, the
taxpayers employed others to assist them, and claimed a deduction
under the regulation for the salaries and expenses of those employees.
 In contrast to this case, it was the Rockefellers themselves who
contributed services to charity, and the deductions related to
payments made by them incident to rendering those services.  Thus,
none of the three cases cited by petitioners considered or discussed
the issue presented here.  See Note, supra, 83 Mich. L. Rev. at 1438
n.58 ("(T)he decision in Rockefeller has no precedential value for the
question of whether money paid by a taxpayer to reimburse another
person's expenses is deductible, because that issue was not before the
court.").

   /29/ It is questionable whether most of the expenses in this case
could be deducted by the missionaries.  The expenses claimed here were
almost entirely for meals and lodging, which are deductible under the
regulation only if incurred "away from home." In Brinley, the court of
appeals held that the meals and lodging expenses of the missionaries
there were not deductible under the regulation because their tax home
was where they served on their mission, if it lasted for more than the
one year that the IRS generally regards as the outside limit of a
temporary stay.  See 782 F.2d at 1333-1334.  Moreover, even during a
"temporary" business stay, the deductibility of meals and lodging
expenses depends upon having a regular, or permanent tax home (i.e.,
business headquarters) elsewhere.  See Peurifoy v. Commissioner, 358
U.S. 59 (1958);  Commissioner v. Flowers, 326 U.S. 465 (1946).
Petitioners seek to avoid the holding in Brinley by asserting that,
even though their missions lasted for more than one year, the
missionaries here did not live in the same location for a year at a
time and therefore their parents' home in Idaho should still be viewed
as their tax home.  But the "away from home" limitation cannot be
avoided by changing one's residence every six months, especially if
one lives in the same general area.  If a taxpayer has neither a
principal place of business nor a permanent residence, the courts have
held that he has no tax home, i.e., he carries his home on his back
for tax purposes and cannot deduct the cost of meals and lodging as if
he were always "away from home." See, e.g., Brandl v. Commissioner,
513 F.2d 697, 699 (6th Cir. 1975);  Rosenspan v. United States, 438
F.2d 905, 912 (2d Cir.), cert. denied, 404 U.S. 864 (1971);  James v.
United States, 308 F.2d 204, 207-208 (9th Cir. 1962).

   /30/ Indeed, even if the regulation authorized a deduction for a
taxpayer other than the individual rendering the services to the
charity, petitioners would not satisfy the "primary benefit"
prerequisite to such a deduction.  The courts below did not have
occasion to pass on the question, but the circumstances here do not
indicate that the payments in question primarily benefitted the
Church.  The missionaries, of course, incurred these expenses for
personal sustenance, and petitioners, by making these payments,
received assurance that their children would be housed and fed.  Thus,
the payments here are of the sort that petitioners might well have
made even for non-charitable reasons (see Orr v. United States, 343
F.2d at 557);  indeed, the record shows that petitioners were
supporting at least one of their sons before he was a missionary (J.A.
15-16), and they claimed both as dependents on their original return
(Pet. App. 18a, 45a).  Although the Church received some indirect
benefit from petitioners' support of their children, the principal
beneficiaries of the payments were individuals, and hence the
unreimbursed expenses in question should not give rise to a deduction
under Treas. Reg. Section 1.170A-1(g).  But see White v. United
States, 725 F.2d at 1272 (finding on similar facts that Church was
primary beneficiary of parents' payments to support their children).

   APPENDIX