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(IRM), secs. 5.15.1.3 and 5.15.1.3.1(1) (Mar. 31, 2000).5 For
this purpose, a necessary expense is one that is used for a
taxpayer’s (and his family’s) health and welfare or production of
income. IRM sec. 5.15.1.3.2(1) (Mar. 31, 2000). The expense
must be reasonable taking into account family size, geographic
location, and any unique individual circumstances. IRM sec.
5.15.1.2.3(1) and (2) (Mar. 31, 2000). Expenses that do not
qualify as necessary may nevertheless be allowable in certain
limited circumstances as so-called conditional expenses. IRM
sec. 5.8.5.4.2 (Nov. 30, 2001).
For purposes of determining a taxpayer’s ability to pay,
charitable contributions are necessary expenses if they provide
for a taxpayer’s (or his family’s) health and welfare or are a
condition of the taxpayer’s employment. IRM sec. 5.15.1.3.2.3(3)
and exh. 5.15.1-2 (Mar. 31, 2000). The IRM specifically
addresses tithes to religious organizations, as follows:
1. Question. If, as a condition of employment, a
minister is to tithe, a business executive is
required to contribute to a charity * * *, will
these expenses be allowed?
Answer. Yes. The only thing to consider is
whether the amount being contributed equals the
5 On May 5, 2004, we ordered the parties to file additional
supplemental stipulations of fact, including stipulations as to
the portions of the Internal Revenue Manual (IRM), as in effect
for the relevant time periods, that the parties discussed on
brief. The parties made appropriate stipulations and included as
exhibits copies of the relevant portions of the IRM. All
references to the IRM are to these stipulated exhibits.
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