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Respondent has stipulated that during the years at issue Mr.
Tschetter was an employee of Wolf Creek Farm. Indeed, Mr.
Tschetter was the corporation’s only employee. And without Mr.
Tschetter’s involvement, Wolf Creek Farm could not have conducted
its farming operations.
Mr. Tschetter’s compensation for services rendered to Wolf
Creek Farm was his salary and employee benefits. Respondent does
not contend that Mr. Tschetter received excessive compensation.
Indeed, respondent contends that Mr. Tschetter was
undercompensated for his services. In addition, we are mindful
that Wolf Creek Farm did not pay medical expenses or health
insurance premiums of its other shareholder, Mr. Tschetter’s
mother.
On the basis of the record before us, we conclude that
medical payments made for the benefit of Mr. Tschetter were made
under a plan for employees and not for shareholders.
Accordingly, during the years at issue, the medical payments made
by Wolf Creek Farm pursuant to its medical plan are excludable
from Mr. Tschetter’s gross income under section 105(b).
Section 162(a) permits a taxpayer to deduct all ordinary and
necessary expenses incurred during the taxable year in carrying
on the taxpayer’s trade or business. An expense is ordinary if
it is customary or usual within a particular trade, business, or
industry or relates to a transaction “of common or frequent
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