dissent">Nims, J., dissenting:

I respectfully dissent. The facts of this case present an archetypical example of the potential for abuse now sanctioned by the majority. For the first three of its four fiscal periods here involved, the Saddleback Valley Community Church designated 100 percent of petitioner’s compensation as a housing allowance. Yet petitioners, with other income (largely Schedule C income) near or in excess of $200,000 for each of the taxable years at issue, are nevertheless awarded an exclusion from tax of substantially all of petitioner’s salary. (The parties stipulated that the rental value of petitioner’s residence, in all relevant taxable years, was an amount that was a great deal less than petitioner’s salary in those years.)

Moreover, with funds available from the above-mentioned alternative sources to cover living expenses otherwise necessary but unrelated to providing a home, petitioners were at liberty to, and did, spend nearly all compensation for the betterment of their residence. Contrary to the majority, I am satisfied that the rental allowance of section 107(2) was not intended to operate in this manner. I believe that both the statutory language and the legislative history counsel a different result, and I disagree with the majority’s reading of these sources.

As regards the statutory text, section 107(2) excludes from a minister’s income “the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home.” (Emphasis added.) The majority’s interpretation, however, disregards “rental” as a modifier of “allowance” and thereby renders superfluous a portion of the statute. While the majority correctly emphasizes that section 107(2) is applicable to a rental allowance used for payment either of rent or of other expenses and purchases involved in providing a home, the majority fails to address the requirement that the funds so used must, as a threshold matter, qualify as the equivalent of a rental allowance. The statute does not simply say that an allowance, or even a housing allowance or a residence allowance, used to provide a home may be excluded. Rather, the law states that gross income does not include a rental allowance so used. The majority’s interpretation effectively writes this term out of section 107(2).

I am convinced that the choice and use of “rental” as a modifier indicates that Congress envisioned an exclusion with a correlation to rental value. I further believe that the title of section 107, “RENTAL VALUE OF PARSONAGES”, offers additional support for this conclusion. I do not dispute that, as the majority observes, a section heading cannot limit the plain meaning of the text, but here the title serves to reiterate the importance and purpose of a word expressly included in the provision.

I also feel that the reference in the text of section 107(2) to the rental allowance as “part” of the minister’s compensation is instructive. No one would seriously contend that the phrase creates a bright-line rule, subject to manipulation by designating all but a pittance of the minister’s salary as a rental allowance, a straw man constructed by the majority and therefore easily demolished. Nonetheless, I believe that the words evidence the manner in which Congress envisaged that the statute would typically operate. If rental value limits the section 107(2) exclusion, it follows that a rental allowance would in the usual case generally constitute only part of a minister’s compensation.

Moreover, legislative history states unambiguously that concerns of fairness and removing discrimination between ministers furnished a home and those provided proportionally larger salaries instigated the development of section 107(2). See S. Rept. 1622, 83d Cong., 2d Sess. 16 (1954); H. Rept. 1337, 83d Cong., 2d Sess. 15 (1954). This Court, too, has opined:

Plainly, the purpose of the new provision was to equalize the situation between those ministers who received a house rent free and those who were given an allowance that was actually used to provide a home. There certainly does not appear to be any intention to place ministers of the second category in a favored position. * * * [Marine v. Commissioner, 47 T.C. 609, 613 (1967).]

Nothing about the majority’s open-handed generosity to the favored few, exemplified by petitioners in the instant case, is consistent with this wise pronouncement.

Although the majority points to a rental value limitation as placing a compliance burden on ministers or churches utilizing section' 107(2), I do not feel that requiring a valuation or appraisal is unduly burdensome in light of the significant tax benefit obtained in return, but unavailable to all nonclerical taxpayers. Such a prerequisite is hardly unusual in tax law. Nor do I believe that it affords sufficient reason 4o ignore Congress’ expressed intent to strive toward fairness.

Lastly, I note that a rental value limitation is not inconsistent with the language from our opinion in Reed v. Commissioner, 82 T.C. 208, 213 (1984), quoted by the majority, which stresses that “Congress clearly provided a different measure for the exclusion under section 107(2) than the measure provided under section 107(1).” A minister seeking treatment under section 107(2) is subject to the distinct requirement that the funds excluded actually be used to provide a home, regardless of whether an additional rental value limit is imposed. Only by imposing such a limit, however, can all terms of the statutory text, as well as the intentions expressed in legislative history, be given meaning and effect.

Therefore, I would hold that the exclusion from gross income for a designated parsonage allowance under section 107(2) is limited to the lesser of the fair rental value of the home or the amount used to provide a home.

Cohen and Ruwe, JJ., agree with this dissenting opinion.

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