Dressler v. Commissioner

John and Charlotte Dressler (plaintiffs) took a parsonage tax deduction pursuant to Internal Revenue Code (code) § 107 on their 1967 tax return for a housing allowance that John received as a minister of the gospel with the Methodist Church. The Internal Revenue Service (IRS) issued the Dresslers a deficiency notice for approximately $500, asserting that John was not eligible for the deduction because he was not ordained, commissioned, or licensed as a minister and did not perform sacerdotal duties. The Dresslers filed a petition against the IRS commissioner (defendant) in the United States Tax Court challenging the IRS’s determination. Per the Dresslers, John held master’s degrees in both church and school music and music and had been a minister of music in the Methodist Church for 26 years and for eight years with another church. The Dresslers further claimed that as a Methodist minister of music, John’s duties were sacerdotal, including participation in the conduct of worship services. The Dresslers requested that their petition proceed under code § 7463, which called for less formal proceedings in small tax cases. The commissioner objected, arguing that although the IRS had issued a relevant revenue ruling, there was no applicable judicial precedent for the supposedly important legal issue at stake. The Dresslers responded that (1) the only statutory basis for denying small-case treatment was that the claimed deficiency exceeded $1,000 for any one year, which was not the case; (2) the issue here was insufficiently important to justify the expense that the Dresslers would spend litigating in a regular proceeding, especially because the case was very fact-specific; and (3) the Tax Court’s previous decisions interpreting § 107 were sufficiently clear. The Dresslers emphasized that the decision in their case would not resolve whether all Methodist or Protestant ministers of music qualified under § 107 but only whether John, with his unique training and duties, so qualified. The commissioner countered that § 7463’s $1,000 threshold was exceeded because the § 107 issue also arose regarding the Dresslers’ later returns.