Ask SAM: Can we give the money from the sale of our church to our pastor as a retirement gift?
July 26th, 2023 by admin
Question:
Our church building is being sold and since we are a non-profit organization can we give the money from the sale of the building to our pastor as a retirement gift? — D.M.
Answer:
You can certainly give the pastor the proceeds of the sale, but there are a lot of things you would need to take into consideration. Mike Wells, a local attorney, explains what the major ones are and has some suggestions for you.
The church should consult a CPA firm to review the actual documents of the sale and design a plan. But this is an educated guess based on the information provided:
The sale of the building should not generate any taxable event for the church, assuming the church is a validly registered charity, and the real estate was in the name of the church when it was sold.
If the church gives the money to the pastor directly as a retirement gift in one taxable year, the church likely will subject the pastor to income tax on the monies in the year in which it is received by him, with all the necessary payments of FICA, etc., that the church would likely have to pay as well.
The church should consider hiring a service, based on the recommendation of the CPA firm it consults, to assist the church in setting up a defined benefit plan to lessen the income tax consequences of the monies being received by the pastor in just one taxable year.
The payment could possibly be spread over multiple years, likely lessening the total amount of taxes the pastor would have to pay.
Posted in: Ask SAM