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allocable to medical care. Ps claimed medical
deductions based on C’s calculations, and also claimed
additional deductions as a result of P-H’s use of the
pool, spa, and exercise facilities.
R audited Ps and issued a notice of deficiency
determining deficiencies on the basis of D’s
calculations, and also disallowing the deductions for
use of the pool, spa, and exercise facilities. R
subsequently sought the advice of an actuary and, on
the basis of the actuary’s report, now claims that the
actuarial method must be used to determine the portion
allocable to medical care. The actuary provided
calculations using both the actuarial method and the
percentage method. Ps rely on C’s calculations and a
supplemental report prepared by P-H.
Held: Ps are not required to use the actuarial
method and may use the percentage method to determine
the portions of the monthly service fees that are
allocable to medical care.
Held, further: Sec. 7491(a), I.R.C., places the
burden of proof on R in certain situations. R concedes
that Ps have satisfied the requirements of sec.
7491(a)(2), I.R.C. Ps submitted credible evidence
under sec. 7491(a)(1), I.R.C., with regard to the
factual issue of the portions of monthly service fees
allocable to medical care. Ps did not submit credible
evidence regarding claimed deductions for use of the
pool, spa, and exercise facilities. Therefore, R bears
the burden of proof on the monthly fees issue but not
on the facilities issue.
Held, further: Sec. 213(a), I.R.C., allows
deductions for expenditures for medical care, subject
to certain limitations. Using the percentage method,
the annual amounts of monthly service fees paid by Ps
that are allocable to medical care are $7,766 and
$8,476 for 1997 and 1998, respectively. Ps are not
entitled to additional deductions for use of the pool,
spa, and exercise facilities.
Delbert L. Baker and Margaret J. Baker, pro sese.
Guy H. Glaser and Vicken Abajian, for respondent.
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