Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 54-80

1954-1 C.B. 11

Caution: Superseded by Rev. Rul. 71-449

IRS Headnote

The portion of a political contribution received by a political organization or a candidate for political office which is diverted from political campaign purposes to the personal use of the candidate or other individual constitutes taxable income to such candidate or other individual.

I. T. 3276, C. B. 1939-1 (Part 1), 108, modified.

Full Text

Rev. Rul. 54-80

Advice is requested whether that part of the political contributions received by a political organization or an individual seeking political office which is diverted to the personal use of the candidate or other individual constitutes taxable income to such candidate or other individual.

Contributions to political organizations are customarily made with the intent and understanding that they be used for the expenses of a political campaign or for some similar purpose. Such contributions are not deductible for Federal income tax purposes by the donor. See I. T. 3276, C. B. 1939-1 (Part 1), 108.

Where a political gift is received by an individual or a political organization and it is held or used for the purposes intended, i. e., for present or future expenses of a political campaign or for some similar purpose, it is not taxable income to the recipient. See I. T. 3276, supra. However, any amount diverted from the channel of campaign activities and used by a candidate or other individual for personal use constitutes taxable income to such candidate or other individual for the year in which the funds are so diverted. For example, a candidate seeking political office receives contributions totaling $1,000 from individuals and organizations for use in his campaign for election to such office. During the campaign the candidate expends $600 of the contributed funds for campaign purposes. He uses the balance of the campaign funds to reduce the mortgage on his personal residence. In such a case the candidate will be required to include in his taxable income the $400 which represents the portion of the fund which he diverted to his personal use. Such amount will be includible in taxable income in the year in which so diverted.

I. T. 3276, supra, is modified to the extent that it is inconsistent with the views expressed herein.