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§ 3.1 MEANING OF GIFTsome point through some alchemy the funds become transformed into incometaxable to the organization.As to the tax treatment, contributions to a church or similar entity used forsalaries are deductible by the donors as charitable gifts and, of course, the salariesare taxable to those who receive them. Gifts made individually are notdeductible to the contributors and are not taxable income to the donee. It is notpurely idle speculation to think that some members of the congregation of thechurch in this case deducted their special-occasion gifts.(b) Quid Pro Quo SituationsAs noted, when a transaction involves consideration, so that the erstwhile donorreceives something of value approximate to the amount transferred, there is nogift. This is because the person received a quid pro quo in exchange for the transfer,and thus there is no true gift at all. (There are several sets of circumstances inwhich a transfer is partially a gift and partially a sale or exchange; 54 these circumstancesare discussed elsewhere. 55 )In one case, a manufacturer of sewing machines sold the machines on a discountedbasis (bargain sales) to schools and other charitable organizations. Theissue was whether the company was entitled to a charitable deduction for the giftelement in the transactions. The court formulated the appropriate test as follows:[I]f the benefits received, or expected to be received, are substantial, andmeaning by that, benefits greater than those that inure to the general publicfrom transfers for charitable purposes (which benefits are merely incidentalto the transfer), then in such case we feel the transferor has received, orexpects to receive, a quid pro quo sufficient to remove the transfer from therealm of deductibility [as a charitable gift]. 56In application of this standard, the court differentiated between the discountsallowed to schools and those for other charities. As to the former, the court concludedthat the discounts were offered “for the predominant purpose of encouragingthose institutions to interest and train young women in the art of machinesewing; thereby enlarging the future potential market by developing prospectivepurchasers of home sewing machines and, more particularly [the company’s]machines—the brand on which the future buyers learned to sew.” 57Thus, these discounts were held not to be of a charitable nature, with the courtconvinced that the company’s “predominant reason for granting such discountswas other than charitable” in that it “expected a return in the nature of futureincreased sales.” 58 By contrast, as to the bargain sales of sewing machines to54 For example, the IRS ruled that proposed sales of columbarium niches and cenotaphs, by a parish of the RomanCatholic Church, for an amount greater than their fair market value, would give rise to a charitable contributiondeduction for the amount exceeding value. Priv. Ltr. Rul. 200213021. These niches would be used for the intermentof cremated remains and the cenotaphs used for remembrances of loved ones who are buried elsewhere.The agency also ruled that, inasmuch as the niches and cenotaphs would be used for decedents forwhom the Church had conducted or expected to conduct a funeral ceremony, the sales would not be an unrelatedbusiness. See § 3.5).55 See § 22.2.56 Singer Co. v. United States, 449 F.2d 413, 423 (Ct. Cl. 1971) (emphasis in original).57 Id. at 423 (emphasis in original).58 Id. at 424. 65