Kenneth & Linda J. Logie - Page 5

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          liable for tax with respect to $5,478 received as Social Security           
               Respondent further determined that petitioners are liable              
          for an accuracy-related penalty pursuant to section 6662(a) of              
          $2,864 for 1994.                                                            
          Parsonage Allowance                                                         
               Section 107(2) provides that the gross income of a minister            
          does not include "the rental allowance paid to him as part of his           
          compensation, to the extent used by him to rent or provide a                
          home".  As a prerequisite for this exclusion, the taxpayer must             
          establish that there was designation of the rental allowance                
          pursuant to official church action before payment.  Sec. 1.107-             
          1(b), Income Tax Regs.  The regulations state in pertinent part:            
               The term "rental allowance" means an amount paid to a minister         
               to rent or otherwise provide a home if such amount is                  
               designated as rental allowance pursuant to official action             
               taken * * * in advance of such payment by the employing church         
               or other qualified organization when paid after December 31,           
               1957.  The designation of an amount as rental allowance may be         
               evidenced in an employment contract, in minutes of or in a             
               resolution by a church or other qualified organization or in           
               its budget, or in any other appropriate instrument evidencing          
               such official action.  The designation referred to in this             
               paragraph is a sufficient designation if it permits a payment          
               or a part thereof to be identified as a payment of rental              
               allowance as distinguished from salary or other remuneration.          
               Respondent does not contest petitioners' status as                     
          "ministers" under section 107(2); rather, respondent argues that            
          the claimed parsonage allowances were not properly designated in            
          accordance with the applicable regulations.  Petitioners bear the           

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