Tax Research Project Essay Example
Shane Fitzgerald ACC 413-0001 – Concepts and Strategies of Taxation
Research Memo
RE: Deductions for medical expenses
September 22, 2011
Facts:Janice was injured in an accident and prescribed 6 months of physical therapy in a swimming pool. She does not live within an hour of the nearest public pool and wants to build a pool in her backyard. Janice lives alone and her annual Adjusted Gross Income is $50,000.
Issue: Is the cost to build and maintain a pool for Janice in part, or completely deductible as a medical expense?
Authorities:
IRC Sec. 213 (a) (d) (1.)
Reg §1.213-1 (e) (i) (ii) (iii)
Rev. Rul. 83-33, 1983-1 CB 70, IRC Sec(s). 213
HAINES v. COMMISSIONER, 71 TC 644, Code Sec(s) 213
Conclusion:
Janice will be allowed to deduct the amount of cost to build her pool which exceeds both the amount it will increase the value of her property and 7.5% of her Adjusted Gross Income. She will also be able to deduct the cost to maintain the pool for the first year for a total medical expense deduction of $4,750.
Analysis:
IRC Sec. 213 (a) says that medical expenses paid during the year that were not covered by insurance are deductible, “to the extent that such expenses exceed 7.5 percent of adjusted gross income.” Janice's Adjusted Gross Income is $50,000, thus she can only deduct medical expenses if they exceed $3,750. However, the cost to build her pool was a capital expenditure because it increased the value of her home. Capital expenditures are typically not deductible but in Janice's case, Reg §1.213-1 (e) (iii) says:
a capital expenditure which is related only to the sick person and is not related to permanent improvement or betterment of property, if it otherwise qualifies as an expenditure for medical care, shall be deductible... a capital expenditure for permanent improvement or betterment of property which would not ordinarily be for the purpose of medical care... may, nevertheless, qualify as a medical expense to the extent
Research Memo
RE: Deductions for medical expenses
September 22, 2011
Facts:Janice was injured in an accident and prescribed 6 months of physical therapy in a swimming pool. She does not live within an hour of the nearest public pool and wants to build a pool in her backyard. Janice lives alone and her annual Adjusted Gross Income is $50,000.
Issue: Is the cost to build and maintain a pool for Janice in part, or completely deductible as a medical expense?
Authorities:
IRC Sec. 213 (a) (d) (1.)
Reg §1.213-1 (e) (i) (ii) (iii)
Rev. Rul. 83-33, 1983-1 CB 70, IRC Sec(s). 213
HAINES v. COMMISSIONER, 71 TC 644, Code Sec(s) 213
Conclusion:
Janice will be allowed to deduct the amount of cost to build her pool which exceeds both the amount it will increase the value of her property and 7.5% of her Adjusted Gross Income. She will also be able to deduct the cost to maintain the pool for the first year for a total medical expense deduction of $4,750.
Analysis:
IRC Sec. 213 (a) says that medical expenses paid during the year that were not covered by insurance are deductible, “to the extent that such expenses exceed 7.5 percent of adjusted gross income.” Janice's Adjusted Gross Income is $50,000, thus she can only deduct medical expenses if they exceed $3,750. However, the cost to build her pool was a capital expenditure because it increased the value of her home. Capital expenditures are typically not deductible but in Janice's case, Reg §1.213-1 (e) (iii) says:
a capital expenditure which is related only to the sick person and is not related to permanent improvement or betterment of property, if it otherwise qualifies as an expenditure for medical care, shall be deductible... a capital expenditure for permanent improvement or betterment of property which would not ordinarily be for the purpose of medical care... may, nevertheless, qualify as a medical expense to the extent