- 15 -
At the core of petitioners’ position that the $8,216 for
“Employee benefit programs” claimed in petitioners’ Schedule F is
deductible under section 162(a) are petitioners’ contentions
that:
(1) “The payment of medical expenses and insurance
premiums were made on behalf [of] Peggy Albers, a bona
fide employee of Darwin Albers’s farm business, pursu-
ant to a valid I.R.C. § 105(b) health plan [AgriPlan/
AgriBiz medical reimbursement plan]; therefore, Peti-
tioners are entitled to deduct the reimbursements as an
employee benefits program expense on their Schedule F”;
(2) the claimed $3,586 of health insurance premiums
“were paid directly on behalf of Peggy Albers, an
employee, to reimburse her for the medical expense
incurred by her spouse pursuant to the I.R.C. § 105(b)
plan [AgriPlan/AgriBiz medical reimbursement plan]”;
(3) “Peggy Albers requested that her employer pay for
these out-of-pocket medical expenses [the claimed
$4,630 of medical and dental expenses] * * * and the
expenses were in turn paid directly by the employer,
Darwin Albers”; and
(4) “There is no provision in I.R.C. § 105 or the plan
provided by Darwin Albers [the AgriPlan/AgriBiz medical
reimbursement plan] that prohibits the employer from
paying the medical expense directly to the provider
rather than reimbursing the employee. In fact, I.R.C.
§ 105(b) explicitly provides that expenses can be paid,
‘directly or indirectly,’ to the employee to reimburse
the employee for expenses incurred by her, her spouse
or dependents for medical care.”
14(...continued)
The legislative history under sec. 162(l) establishes that
that statute was enacted “to reduce the disparity between the tax
treatment of owners of incorporated and unincorporated busi-
nesses.” S. Rept. 104-16, at 11 (1995); see also H. Rept. 104-
32, at 7-8 (1995).
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