Delbert L. and Margaret J. Baker - Page 2

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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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