- 34 - assumptions about costs of services with the longevity projection to determine the lifetime total costs of care and the lifetime total medical care costs. By applying the lifetime medical care costs, the fourth step uses the contract provision about monthly service fees paid to determine the prepaid medical care costs. The amount of medical care that is funded before transfer to assisted living or nursing care is the difference between lifetime medical care costs and the sum of monthly service fees paid. This difference is referred to as the prepaid medical care costs and should be considered deductible under section 213(a). The calculation of the portion of the prepaid medical care costs that can be claimed for the entrance fee and the portion that can be claimed for the total monthly service fees for the year is at the discretion of the taxpayer with the limitation that the actuarial present value sum of all deductions does not exceed the prepaid medical care costs. C. Appropriate Allocation Method The threshold dispute is over which method to use to determine the portion of the monthly service fees that is allocable to medical care. As explained in detail below, the percentage method preferred by petitioners has been accepted by respondent and generally relied upon since at least 1967. Properly applied, the percentage method provides a reasonable and straightforward approach for determining the portion of monthlyPage: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Next
Last modified: May 25, 2011