James Lewis and Lilian E. Hunter - Page 2

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                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.2              
          The stipulated facts and the related exhibits are incorporated              
          herein by this reference.  At the time of filing the petition in            
          this case, petitioners resided in Los Angeles, California.                  
               James Lewis Hunter and his wife, Lillian E. Hunter, filed a            
          joint Federal income tax return for 1996.  On Schedule A,                   
          Itemized Deductions, of their return, petitioners claimed $10,530           
          in medical and dental expenses.  The expenses included medical              
          and dental bills that petitioners paid on behalf of their                   
          daughter.3  After accounting for the 7.5-percent adjusted gross             
          income (AGI) threshold limitation under section 213,4                       
          petitioners’ medical and dental expense deduction equaled $2,227.           
               On their Schedule A, petitioners also claimed a $50,000                
          casualty loss for earthquake damage to the foundation of their              
          residence.  After the threshold limitations under section                   

               2  We note that petitioner Lillian E. Hunter did not sign              
          the stipulation of facts.  Because petitioners have not argued              
          that the stipulation of facts does not apply to Mrs. Hunter, we             
          treat the stipulation of facts as applying to both Mr. Hunter and           
          Mrs. Hunter.                                                                
               3  On the return, petitioners listed their daughter and her            
          two children as dependents.  Respondent does not challenge these            
          dependency exemptions.                                                      
               4  Sec. 213 provides that “There shall be allowed as a                 
          deduction the expenses paid during the taxable year, not                    
          compensated for by insurance or otherwise, for medical care of              
          the taxpayer, his spouse, or a dependent * * * to the extent that           
          such expenses exceed 7.5 percent of adjusted gross income.”                 

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