Here is the text used by my preparer in 2009 for the additional statement attached to our return:
(I have substituted original numbers for the amounts given in the example above)
Statement For Schedule SE - Part I, Line 2
Schedule C - Minister 26,250.
Change in Schedule C deductions (see below) ( 1,250.)
Minister's housing allowance 10,000.
Total to Schedule SE - Part I, Line 2 35,000.
Statement for Schedule C, Line 28 (Total Deductions)
The tax-exempt housing allowance exclusion of 10,000 is 25% of total
ministerial income. Following 'Deason v. Commissioner', 41 T.C. 465 (1964),
deductions were reduced on Schedule C by the amount allocable to the
tax-exempt income. This rule does not apply to amounts subject to
Self-employment tax. Accordingly, Schedule C income must be adjusted.
(He then lists Schedule C Expenses, showing the original total for each category, the amount allowed by Deason, and the amount of the Deason reduction)
Finally, he gives the Deason % calculation:
Housing / Total Income = % Reduction
10,000 / 40,000 = 25.00%
