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Religious orders, which by their nature are typically under the jurisdiction and control of a church, were present in the United States long before the enactment of the sixteenth amendment which authorized the present federal income tax. The Internal Revenue Code generally defines gross income for individuals and organizations alike as income from whatever source derived. Nevertheless, certain organizations which are tax-exempt are not required to pay tax on their income, unless the income is from a business unrelated to the exempt purposes of that organization. It is typical for many religious orders to require a member to take a vow of poverty. It is also not unusual for a member to be directed by the religious order to perform services for either that same order or some other organization. Because these members are often paid for their services, particularly for services performed for outside organizations, an issue has arisen as to whether a member of a religious order who is compensated for services, but who also, pursuant to a vow of poverty, is required to deliver all such earnings to the order, has income within the meaning of the Code.

Although there is no definitive answer by way of statute or case authority, the evolution of the issue has produced three alternative theories.

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