401K donation earmarked to pastor

by John Ward
(Paradise, Tx United States)

An individual is having his 401k make distributions to a church in order to take a charitable contribution but not pay income tax on the distribution.

In addition he has asked that the distribution be given to the pastor and youth pastor equally.

How does the church handle the distribution to the pastor and youth pastor. Is it reportable and taxable to the pastor and youth pastor.

Comments for 401K donation earmarked to pastor

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Louise - Contact your Governing Body!
by: Vickey

Louise, I just seen your comment. Please, take this immediately to your governing body.

The decision to accept that donation under those terms should not be made by one person.

There is a whole host of issues that could arise from that donation restriction...including "private inurement".
Donor Advised Fund
by: Louise

A church member has made a contribution to a donor advised fund who in turn made a grant to our church because the funds had to be made to a 501 C3 organization. The donor specified that the monies had to be spent 60% going to the pastor's salary, 25% undesignated and the remaining 15% going to a fund of the donor's choice. The donor then told me (as church Treasurer) that the 60% for the pastor was not to be used as regular salary for the pastor, but as a bonus to the pastor for pastor appreciation. I am not comfortable accepting this donation as written (60% pastor's salary) because the monies are not actually going to the church for church use or expenses, but to the pastor as a gift. Anyone else have experience with donor advised funds?
You can't designate monies given to an individual as "charitable"
by: Marcia

He can't do that and still get a tax deduction for it. He could donate it specifically to the Youth fund or to the Missions fund, but he can not give that money to individuals and call it a "charitable donation"

That money given to the pastor is taxable income at that point if I am not mistaken. His employer should be having issue with that as well unless the check is made out to the Church then he is requesting that the church then distribute those funds to the Pastor after you deposit it.

In the case of the latter, you have every right and legal responsibility to say NO!
No Charitable Contribution for Individuals
by: Vickey

No.

He cannot do that.

The minute he designates it to an individual(s)...it is no longer considered a tax deductible charitable contribution.

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