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contract extends through a small portion of the next taxable
year, petitioners as cash method taxpayers may nonetheless
currently deduct the entire expenditure. Kauai Terminal, Ltd. v.
Commissioner, 36 B.T.A. 893 (1937); sec. 1.461-1(a)(1), Income
Tax Regs. Petitioners are therefore entitled to a deduction of
$2,385 for Dr. Rinker’s medical malpractice insurance premiums.
3. Disability Insurance
Dr. Rinker testified that she carried a disability insurance
policy on herself. She testified that the reason she carried the
policy was to keep her practice afloat should she become unable
to see her patients for an extended period, and that the policy
amount would cover only the most basic expenses of her business.
This Court has long held that a taxpayer may not deduct his
or her disability insurance premium payments as business expenses
when no limitation is placed on the use of proceeds from the
policy. Blaess v. Commissioner, 28 T.C. 710 (1957); Ferris v.
Commissioner, T.C. Memo. 1986-32; Andrews v. Commissioner, T.C.
Memo. 1970-32. A taxpayer’s “mere declaration of his intent” to
apply potential proceeds from a disability insurance policy
towards office expenses in the event of the taxpayer’s disability
does not convert an otherwise personal expenditure into a
deductible business expense. Blaess v. Commissioner, supra at
715-716. We therefore deny petitioners a deduction for
disability insurance premium payments.
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