Danvis S. and Sheryl S. Smith - Page 4




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          petitioners, primarily in the form of a “housing allowance”.2               
          Petitioner, upon receiving paychecks from unrelated employment,             
          would sign the back of the paychecks over to Alpha Ministries               
          prior to depositing them into a checking account bearing the                
          designation “Alpha Ministries”.  The account into which the funds           
          were deposited was owned and controlled by petitioners, and                 
          petitioners alone had authority to use the funds therein.                   
               Petitioners filed joint Federal income tax returns for the             
          years in issue.  On these returns, petitioners claimed deductions           
          of $27,150 in 1995 and $30,500 in 1996 for charitable                       
          contributions purportedly made to Alpha Ministries.  In the                 
          statutory notice of deficiency, respondent disallowed these                 
          deductions in full.                                                         


          2Petitioners, relying on uncorroborated summary documents                   
          entered into evidence, argue that Alpha Ministries had the                  
          following income and expenses for each of the years in issue:               
               1995          1996                                                     
               Income                                                                 
               Cash donations by petitioners            $31,560       $25,740         
               Cash donations by other individuals          290           100         
               Interest on deposits                          12            18         
               31,862        25,858                                                   
               Disbursements                                                          
               Petitioner’s housing allowance           $22,000       $24,775         
               Petitioner’s health care allowance           700           -0-         
               Petitioner’s auto/travel allowance           700           200         
               Petitioner’s books and materials              94           -0-         
               Loan to petitioner                         8,135           -0-         
               Supplies, postage, fees, and copies           34           -0-         
               31,663        24,975                                                   
          Although we do not accept these figures as actual amounts of                
          income and expenses of Alpha Ministries, we accept them as an               
          admission by petitioners that any funds received by, or                     
          designated for use by, Alpha Ministries were used almost                    
          exclusively for the personal benefit of petitioners.                        




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