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Tax Deductible Sex


Won a slave auction to benefit a charity at Mephisto's? OK, but what about a charitable contribution deduction on your income tax? Francine Traline tried it, the IRS denied it, and Francine and her attorney Franklin Moore took them to Tax Court. Here's the decision (I wish; this is a JOKE, son).


T.C. Summary Opinion 2011-69




Docket No. 314159-08S. Filed April 31, 2011.

Franklin Moore and Jacques Stropp for Petitioner

I. Jack Hoff, Phil A. Tcho, Dick Hertz and Jenny Tailyor for Respondent

DICK EVERHARD, Special Trial Judge: This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect at the time the petition was filed. Trial was held in Muscogee, Oklahoma, being the most ridiculous location we could find to create maximum inconvenience to the parties and witnesses.

Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion shall not be treated as precedent for any other case. Unless otherwise indicated, subsequent section references are to the Internal Revenue Code (Code) in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. [All dollar amounts are rounded to the next lower amount. Footnote by the Court]

Respondent determined a $990 deficiency in Petitioner's

Federal income tax as well as a $198 negligence penalty under section 6662(b)(1) for tax year calendar 2008. After concessions and stipulations (the facts and the conclusions of law therein stated are hereby incorporated into the record of this case as if herein set forth at length), the only two (2) issues for decision are: (1) Whether petitioner is entitled to a deduction of $3,000 as a charitable contribution to the First Presbyterian Church of Kumquat, State of Confusion (First); and (2) whether petitioner is liable for a negligence penalty under section 6662(b)(1).


Petitioner was at all times during the tax year at issue an individual, calendar-year, cash-basis taxpayer, residing in the State of Confusion.

On or about September 31, 2008, Petitioner issued an electronic automated clearinghouse check drawn on Petitioner's regular personal checking account with Virgin Bancorp, in the sum of $3000, payable to First, which was collected and paid in due course. First is a religious corporation organized and existing under the laws of the State of Confusion, and is an exempt entity pursuant to section 501(c)(3).

Section 170(a)(1) generally permits a taxpayer to deduct contributions made to qualifying charitable groups of the kind including First, subject to certain limitations.

On or about November 31, 2008, Rev. Kathleen MacArthur McKillop (Rev. McKillop), as Pastor of First, executed and mailed to Petitioner a written receipt for said payment, which stated in pertinent part: "No goods or services were received in exchange for this contribution." Such statement is required by Section 170(f)(8)(B)(ii).

It is conceded that First supplied neither goods nor services to Petitioner, nor induced anyone else to do so. However, Petitioner received from third persons wholly unrelated to First certain acts and practices, and engaged in certain transactions with such third persons, in connection with such payment that might fall within the ambit of "services". The critical distinction is whether those things received by Petitioner were in fact "services" of the kind that would thereby render the donation payment for such services, and not a gift at all. And of course such a payment is nondeductible as a personal expense.

The Testimony and Evidence

Petitioner testified that on September 31, 2008, a Saturday night, she attended a "slave auction" to benefit an unnamed local charity (subsequently, but on the same night, identified as the shelter for homeless persons operated by First). Rev. McKillop testified that First did not sponsor or promote, and was not even aware of the existence of, this "slave auction" or any like event, the details of which she found extremely distressing, causing her to be excused frequently during her testimony. She repeatedly ran her finger under her clerical collar, and nervously crossed and re-crossed her long, beautifully shaped legs, pulling her skirt down in embarrassment.

Petitioner testified that this "slave auction" was held not on premises owned by, or under the control of, First, but rather at a privately-owned "BDSM club" known as "The Mephisto Club"(Mephisto's), located within the city limits of the City of Kumquat. ["BDSM" as used herein means bondage, discipline, sadism and masochism; not a law firm but rather a series of sexual perversions, although some law firms are, as the Court well knows, a series of sexual perversions. Footnote by the Court]

Ms. Betsy Flanagan (Ms. Flanagan), a managerial-level employee of Mephisto's owner, Creampie LLC (Creampie), a Confusion limited liability company, lessee of the premises whereon Mephisto's was situated and operator of Mephisto's, testified that no monetary or other payment was permitted to any participant in sexual acts or transactions on or about premises owned or leased by Creampie. To permit or suffer any economic compensation for such acts on or about Mephisto's premises would render Creampie, its managers, members and employees liable to criminal prosecution for promoting prostitution, and eviction from the leased premises occupied by Mephisto's. Ms. Flanagan testified that she and Mephisto's security staff regularly summoned local police to Mephisto's premises to arrest persons soliciting for prostitutes (Johns) or persons offering to engage in prostitution (prostys).

Ms. Flanagan testified that various religious and political groups were looking for any excuse to shut down or drive Mephisto's out of business, so a bonus was paid to any employee who could obtain the arrest and conviction of any John or prosty. Ms. Flanagan testified that "(T)he word got out pretty quick to the 'low-lifes' to stay away from Mephisto's". Petitioner placed in evidence the relevant portions of the then-current Creampie Employees' Handbook, which stated in substance that to which Ms. Flanagan testified. The Court found Ms. Flanagan's cream-white skin, jet-black lustrous hair, luscious red mouth, deep cleavage between marble breasts worthy of the Venus de Milo, and firm, rounded buttocks positively entrancing. However, the Court was deterred by her large gold wedding band, studded black choker, studded wrist and ankle cuffs, black leather pants suit, buff and ripped body and severe demeanor.

Petitioner testified that it was the practice of Mephisto's to hold a "slave auction" on the fourth Saturday of each month, to benefit a local charity in the City of Kumquat. At such auctions, persons who engaged in gross acts of sexual perversion, testimony of the details of which so shocked the Court that frequent recesses for relief were necessitated, put themselves up to be auctioned like cattle to others of equally filthy and perverted desires. Payment in money or by items of value, however, was strictly forbidden, and would lead to arrest and imprisonment if proven. Those being auctioned were in reality slaves.

Upon conclusion of the filthy exhibition of the slaves in various states of undress, submission, sexual arousal and similar degraded conditions, they being hawked by an "auctioneer" in the most debasing and humiliating fashion; and conclusion of the bidding and payment by means of electronic automated clearinghouse check or by credit card to the direct order or for the direct benefit of the designated charity; the "slave" was delivered into the custody of the successful bidder (Master or Mistress) or bidders (Masters or Mistresses, sometimes both), and were led to special rooms or alcoves within Mephisto's premises, wherein the Master(s) or Mistress(es)(or both) might indulge and satisfy their filthy, disgusting and perverted lusts all night with the purchased "slave".

Rev. McKillop testified she knew nothing of this, and would pray for those so sunk in sin, but would not refund any monies paid, as the monies had all been spent for Christ's poor, and she was glad to get money even from the most despised and despicable sources for that purpose. Rev. McKillop testified that there were frequently large gifts given to First for its shelter, such as bequests and distributions from charitable trusts, but never enough for all the work it had to do. Rev. McKillop testified she thought Petitioner's check was another donation, and highly welcome. Rev. McKillop testified that Petitioner was not a member of First, but had made small contributions to the shelter, both before and since September 31, 2008, in modest amounts, no one contribution ever exceeding $250.

Rev. McKillop then began to preach a sermon on the text "And the King shall answer and say unto them, Verily I say unto you, Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me," but this was objected to by Respondent and was duly stricken.

Petitioner testified that on September 31, 2008, there was to be auctioned as a slave one Joyce Langston (Joyce). Petitioner testified that she had observed Joyce being auctioned on a previous occasion, although Petitioner was not on that occasion Joyce's Mistress. Petitioner was, however, permitted to observe Joyce's "service" and found it sexually arousing. Petitioner testified that Joyce screamed loudly when her breasts were struck with a riding crop; was frequently brought to the point of orgasm by manual stimulation and stimulation by device or object, of her breasts, vagina and anus, but was always able to restrain herself; and, when permitted to orgasm, had multiple climaxes while crying, screaming and thrashing about in a most abandoned manner. [Here the Court was obliged to call a recess, as Petitioner, counsel, the witnesses, the spectators and the Court felt very warm and needed air. Footnote by the Court]

Joyce testified that she enjoyed being disciplined for her misdeeds, which were many, by her Master or Mistress (or sometimes more than one of each). She often failed her Master or Mistress (as she called them) by failing to orgasm when directed, by orgasming when not permitted, and for failing to satisfy Master or Mistress sexually by using her mouth, anus, breasts, fingers or vagina. She enjoyed having her breasts, labia and clitoris clamped or bitten or both; being flogged, slapped, paddled or beaten; having Mistress place Joyce face-downward and flat on the floor, and step on her nipples with 7-inch stiletto heels; having Master or Mistress rape her with their sex organs, other body parts, or objects, in her mouth, anus or vagina (or all three at once); and enjoyed "playing telephone", which involved having an old U.S. Army field telephone's terminals attached by alligator clamps to her nipples, buttocks or labia and having Master or Mistress operate the crank, giving her repeated electric shocks.

Joyce testified that Petitioner was her Mistress on the night of September 31, 2008. Petitioner dragged her from the auction block by her hair, slapping her face and spanking her while wearing a rough leather work glove. Petitioner was wearing a black corset with silver lightning flashes embroidered thereon, garter belt, black lace stockings, 7-inch stiletto heel boots, and a black face mask, her long black hair in a bun with a sharp letter-opener holding the bun together, and no pants or other covering for her pussy, which glistened with her love-juices, or her elegant rosebud anus. Joyce testified that she (Joyce) was nude throughout, her breasts engorged and nipples protruding, her vagina leaking, her hair soaked with perspiration, trembling with anticipation.

Petitioner had previously testified just as Joyce had corroborated. Petitioner testified that she slapped Joyce's face and boxed her ears, taking care to do no injury to Joyce's eardrums. Petitioner took care to make sure Petitioner would recognize Joyce's safeword (a code word that a "slave" would use to stop too extreme treatment by a Master or Mistress). Petitioner testified she once ignored a safeword, injured a "sub" (as she explained it, a submissive), and was forever in misery because of it. Petitioner testified that she carefully stepped on Joyce's nipples while Joyce lay prone, and used the toe of her right boot to penetrate Joyce's mouth, vagina and anus.

Joyce testified that she was proud she never "safeworded", even when Petitioner flogged her vagina and perineum with a steel rod wrapped in rubber, horrible blows from which made Joyce think her pubic bone had been broken (it had not, and no permanent injury was caused). Joyce testified that Petitioner denied her orgasm while manipulating her sex organs, repeatedly raped her anally with the aforesaid steel rod wrapped in rubber (with only the slightest lubrication from Joyce's dripping vagina), and that Petitioner repeatedly forced Joyce to perform anilingus on Petitioner.

Finally, after four hours of repeated sexual perversion, the details of which the Court, spectators and counsel were forced to hear from Joyce's ravaged mouth, causing exclamations of disgust from some, and repeated moans from others, among the Court, counsel, witnesses and the spectators; but necessary for the Court and counsel to hear in discharge of an onerous but essential public duty mandated by the Internal Revenue Code and the Regulations promulgated thereunder; [to which be all honor and glory, now and forever, in the name of Secretary of the Treasury Timothy Geithner and Internal Revenue Commissioner Douglas Shulman, amen. Footnote by the Court] Petitioner finally gave Joyce oral sex that caused Joyce to have seven consecutive screaming gibbering convulsive orgasms.

Joyce testified Petitioner then tenderly kissed her, dressed her bruises with lotion containing a powerful topical anesthetic, helped to dress her carefully and lovingly, Petitioner and Joyce exchanging kisses as Joyce was dressed, and gave Joyce Petitioner's address and telephone number, whispering to her "Darling, you were great. We must have another play date soon."

Joyce testified that, while recovering during the following week, she masturbated to orgasm no fewer than six times daily, reliving this horrible, degrading, disgusting experience, and mailed to Petitioner the tissues she used to wipe her dripping vagina, with a letter begging Petitioner to piss on the tissues and then masturbate while thinking of Joyce, alone and unpunished.

Joyce and Petitioner both testified that no thought had been given to any monetary or economic payment from one to the other (which would have been disgusting and degrading, and debased their otherwise ecstatic and loving relationship), that each other's loving service and sexual fulfillment were their only intentions, and that bastard Bible-bashing clerical Fascists ("beg pardon, Rev. McKillop, of course we didn't mean you, you're chaplain to all the sinners and outcasts") could go fuck themselves with a red-hot poker ("But forgive us, that's sinful").

Petitioner and Joyce each testified that they had had subsequent encounters of the disgusting kind hereinabove described, at each other's homes, which involved no payment of any kind, whether to First or anyone else, except that each time when one or the other was the hostess of the encounter, she had bought a Chinese or Thai takeaway dinner and bottles of a good Gewurztraminer or Shiner Bock, which they shared, as they were often ravenously hungry and thirsty after hot, painful, nasty, filthy, orgasmic sex.

The Law

The term "services" has been variously defined, but surely never in this context. Broadly speaking, "services" include "intangible products that are not goods (tangible products), such as accounting, banking, cleaning, consultancy, education, insurance, know how, medical treatment and transportation." "Services" include work performed for pay or compensation, but not only that. "Services" are any form of work or benefit bestowed, other than tangible items, objects or goods.

The leading case is U.S. v. Amer. Bar Ass'n Endowment, 477 U.S. 105 (1986).

First, we must answer the threshold question is "who provided the services"? In Amer. Bar, it was the donee of the contribution, which directly supplied the services. Pursuant to Fed R Evid 201(b), the Court takes judicial notice that tax-exempt organizations frequently solicit contributions of goods and services, which are auctioned to the public for the benefit of the organization. The donor may take the section 170(a)(1) deduction for the fair market value of the goods or services, but the successful bidder of course gets no deduction. In such cases, however, it is the tax-exempt organization which acts as clearinghouse for the goods or services, and generally sponsors the auction.

Here, of course, the donee had nothing to do with the services, and was revolted at the thought of anyone doing such things as Petitioner and Joyce described.

Justice Thurgood Marshall, a judicial giant, writing for the Court in Amer. Bar, stated:

"A payment of money generally cannot constitute a charitable contribution if the contributor expects a substantial benefit in return. S. Rep. No. 1622, 83d Cong., 2d Sess., 196 (1954); Singer Co. v. United States, 196 Ct. Cl. 90, 449 F.2d 413 (1971). However, as the Claims Court recognized, a taxpayer may sometimes receive only a nominal benefit in return for his contribution. Where the size of the payment is clearly out of proportion to the benefit received, it would not serve the purposes of 170 to deny a deduction altogether. A taxpayer may therefore claim a deduction for the difference between a payment to a charitable organization and the market value of the benefit received in return, on the theory that the payment has the "dual character" of a purchase and a contribution. See, e. g., Rev. Rul. 67-246, 1967-2 Cum. Bull. 104 (price of ticket to charity ball deductible to extent it exceeds market value of admission); Rev. Rul. 68-432, 1968-2 Cum. Bull. 104, 105 (noting possibility that payment to charitable organization may have "dual character").

"In Rev. Rul. 67-246, supra, the IRS set up a two-part test for determining when part of a "dual payment" is deductible. First, the payment is deductible only if and to the extent it exceeds the market value of the benefit received. Second, the excess payment must be "made with the intention of making a gift." 1967-2 Cum. Bull., at 105. The Tax Court has adopted this test, see Murphy v. Commissioner, 54 T. C. 249, 254 (1970); Arceneaux v. Commissioner, 36 TCM 1461, 1464 (1977); but see Oppewal v. Commissioner, 468 F.2d 1000, 1002 (CA1 1972) (expressing "dissatisfaction with such subjective tests as the taxpayer's motives in making a purported charitable contribution" and relying solely on differential between amount of payment and value of benefit)." 477 U.S. 105, 117 et. seq.

Applying the principles so brilliantly expounded by the great Justice Marshall, and employing every Cum. Bull. in sight, we are compelled to find that the "services" provided to Petitioner were so disgusting, degenerate, perverted and downright fucking filthy, that they have no substantial value, or indeed any value, to any decent human being. Indeed, any "market" for those services would constitute a criminal enterprise under the laws of the State of Confusion, and therefore a fortiori such services cannot have any market value.

We must apply State law to ascertain if these degenerate, revolting acts and practices can be properly classified as "services", upon which a monetary value may be imposed.

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