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among other items, salaries of nurses, nurses’ aides,
orderlies and incidental medication and supplies, as
well as expenses allocable to the facility, such as,
housekeeping, maintenance and utilities, a
proportionate share of interest on indebtedness, real
estate taxes, insurance, and depreciation.
* * * * * * *
(5) Medical expenses for purposes of the
computation of the ratio of medical to total expenses
include, but are not limited to, salaries of the
Medical Center staff, incidental medication and
supplies, the proportionate amount attributable to the
provision of medical care of housekeeping, maintenance,
utilities, administrative and marketing costs, interest
on indebtedness, real estate taxes and depreciation of
the nursing facility.
There is no requirement in the revenue rulings that
taxpayers engage in an actuarial analysis to factor in life
expectancy and health care level expectancy on the basis of the
residency population of a CCRC to determine estimated lifetime
medical care costs and total costs. The rulings focus on the
amount of fees paid by residents to the CCRC during the taxable
year that are properly allocable to medical care in the year
paid, and imply that the percentage method is an appropriate
method for taxpayers to use. The actuarial method used by
respondent’s expert requires estimating total lifetime costs of
services and lifetime medical care costs, steps that are not
anticipated or required by the revenue rulings. Additionally,
the longstanding practice of the Commissioner has been to allow
use of the percentage method. The Commissioner’s guidance
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