Rev. Rul. 69-473

Advice has been requested whether out-of-pocket expenses incurred by a taxpayer under the circumstances described below, are deductible as charitable contributions.

A charitable organization of the type described in section 170(c)(2) of the Internal Revenue Code of 1954 conducts a charitable program consisting primarily of rendering assistance to indigent unmarried pregnant women. As part of this program, during the middle months of their pregnancy, these women are placed in the homes of families who volunteer their assistance to the organization. The participating families are selected only after they have been investigated and approved by the organization. In addition the progress of each woman while living with the family is supervised by the organization's staff. The organization requires that the families selected provide the women with living quarters that will insure their privacy, and furnish them with a proper diet, clothing, and a small weekly allowance. The woman is to be treated as a member of the family household and as such is expected, when capable, to assist in such household chores as washing dishes, dusting, and cooking but the organization stresses to the family that the role of the woman is not that of an employee. The weekly allowance is intended to permit the woman to exercise her independent judgment in spending or saving.

The taxpayers, husband and wife, participated in the program of the charitable organization by taking a woman, not related to them, into their home for a two-month period. As required by the organization the husband and wife paid for her food and clothing and gave her a small weekly allowance. They were not reimbursed for these expenditures.

It is well established that contributions made directly to individuals, no matter how deserving, are not deductible as charitable contributions under section 170 of the Code, and that contributions or gifts made to organizations qualifying under section 170 of the Code are not deductible if they are made for the benefit of designated beneficiaries.

In the instant situation, the charitable organization assumed the responsibility of caring for the unmarried pregnant woman. When the taxpayers opened their home for the woman referred to them by the charitable organization they were aiding the organization in carrying out its charitable activities and the out-of-pocket expenses incurred by them are regarded as contributions or gifts for the use of the charitable organization.

Accordingly, since the out-of-pocket expenses incurred by the taxpayers for the food and clothing and the weekly allowance are directly connected with and solely attributable to the rendition of gratuitious services to the charitable organization described in section 170(c)(2) of the Code, it is held that these amounts are deductible by the taxpayers as charitable contributions in the manner and to the extent provided by section 170 of the Code in computing taxable income. However, amounts the taxpayers would have expended had the woman not been in their household (such as the cost of rent, utilities, taxes, insurance, and similar items) are not charitable contributions under section 170 of the Code.