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In order to satisfy that burden, petitioners must establish that
Mrs. Haeder was petitioner’s bona fide employee for the years in
issue, that the reimbursement of medical expenses was an ordinary
and necessary business expense, and that petitioners paid the
expenses during the applicable year.
Section 219(a) allows a deduction from gross income for
qualifying contributions to an IRA, subject to certain
limitations and restrictions. The maximum allowable deduction is
limited to the lesser of $2,000 or the amount of compensation
includable in the individual’s gross income for the taxable year.
See sec. 219(b)(1). In order to establish that Mrs. Haeder was
entitled to the IRA deduction for each year in issue, petitioners
must prove that Mrs. Haeder had compensation includable in income
for the respective years.
The deductions for wage expenses, IRA contributions, and
medical plan expenses require proof, in the first instance, that
Mrs. Haeder was petitioner’s employee during the years in issue.
Petitioners maintain that Mrs. Haeder was petitioner’s employee
and performed many valuable services for petitioner relating to
his law practice, including secretarial, clerical, bookkeeping,
and cleaning services. Petitioner contends that Mrs. Haeder’s
duties were substantial, necessary, and continuing throughout the
years. Petitioners concede that petitioner had few clients
during the early years after their move to South Dakota. They
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