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income as alimony received and disallowed Burley's and Mary's
claimed deduction.
Medical Insurance Premiums
Alexandra was covered under the dealership's medical
insurance policy until 1992 or 1993, when the insurance carrier
informed the dealership that she no longer qualified as an
insured because she was not its employee. During 1994, Alexandra
and Burley arranged for the dealership to reimburse Alexandra for
the cost of the premiums for the medical insurance which she had
obtained through her employer. This arrangement was the least
costly alternative for providing medical insurance for Alexandra.
The dealership issued Burley a Form 1099-DIV for 1994 which
reflected that he had received a constructive dividend in the
amount of $1,998, the total of the medical insurance premiums
reimbursed by the dealership during 1994.
Alexandra reported the $1,998 as alimony received on her
1994 original return. She later filed her amended return for
1994 on which she omitted $1,999.3 Burley and Mary claimed an
alimony paid deduction in the amount of $1,998 on their 1994
return. In the statutory notices of deficiency, respondent
included the $1,998 in Alexandra's income as alimony received and
disallowed Burley's and Mary's claimed deduction.
3 This amount represented the previously reported medical
insurance premiums. Alexandra agrees that the correct amount of
the medical insurance premiums in issue is $1,998.
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Last modified: May 25, 2011