The Ninth Circuit yesterday affirmed the Tax Court (125 T.C. 281 (2005)) in holding that a couple’s tuition and fee payments to their children’s Jewish day schools do not qualify for the charitable deduction because they received a substantial benefit from their payments and lacked charitable intent. Sklar v. Commissioner, No. 06-72961 (9th Cir. Dec. 12, 2008). From the DOJ press release:
The Sklars sought charitable deductions under § 170 for portions of their tuition payments made to the religious day schools their children attended, asserting that those portions of the tuition payments were for “intangible religious benefits.” The Sklars made three arguments in support of their position, each of which was rejected by the Ninth Circuit.
First, the Sklars argued that their tuition and fee payments to exclusively religious schools were deductible under a “dual payment analysis” to the extent the payments exceeded the value of the secular education their children received. The Ninth Circuit rejected this argument, finding that the Sklars had not shown that the payment exceeded the fair market value of the benefit received for their payments (i.e., an education for their children), and they had not shown that any excess payment was made with the intent of making a gift.