Tax Legal Services · Primary-source case analysis

Hernandez: A Fixed Payment for Services Was Not a Charitable Contribution

By Aneeta Mishra and Timothy Chan

Published September 17, 2026

Hernandez v. Commissioner examined section 170 deductions claimed for payments made under fixed schedules to receive particular religious auditing and training sessions.

Section 170 distinguishes a gift from an exchange

A deductible charitable contribution is an unrequited transfer to a qualified recipient. A payment made with an expectation of receiving goods or services is not fully a gift merely because the recipient is a religious or charitable organization.

External transaction features showed consideration

The church used fixed prices tied to the length and sophistication of sessions, tracked prepaid services, issued refunds for unused services, and did not provide the sessions without the required payment. Those objective features established a quid pro quo.

Religious character did not remove the exchange analysis

The Court declined to create a special rule for payments producing religious benefits. Section 170 applies a neutral contribution-or-gift requirement, and examining transaction structure did not require judging religious doctrine.

A mixed payment requires allocation and substantiation

Hernandez rejected the claimed full deduction on the record presented. Current law separately governs disclosures and substantiation when a payment exceeds the value of benefits received, so contemporaneous receipts and a defensible valuation remain essential.

Key takeaways

• Identify every good or service the donor expected to receive.
• Compare the payment with any stated price or fair-market value.
• Retain the contemporaneous acknowledgment and disclosure.
• Deduct only the qualifying excess, subject to current section 170 rules.