- 17 -
Huber’s spouse. Likewise, payment of the medical expenses for
the Hubers’ daughter was based on her status as Mr. Huber’s
dependent. The derivative participation of Mr. Huber’s spouse
and dependent is plainly contemplated both by the medical plan
and by section 105(b).
On the basis of the record before us, we conclude that
medical payments made for the benefit of the Hubers and/or their
daughter were made under a plan for employees and not for
shareholders. Accordingly, during the years at issue, the
medical payments made by Waterfall Farms pursuant to its medical
plan (the insurance premiums and other medical care expenditures)
are excludable from the Hubers’ 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 a 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
occurrence in the type of business involved.” Deputy v. du Pont,
308 U.S. 488, 495 (1940). An expense is necessary if it is
appropriate and helpful for the development of the business. See
Commissioner v. Heininger, 320 U.S. 467, 471 (1943).
When payments for medical care are properly excludable from
an employee’s income because they are made under a “plan for
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011