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Long Term Care Insurance
Insured Insurance Period of Annual Amount Last Date
Company Coverage Paid Paid
Employee American total
Fidelity months 12 575.96 02/16/02
Assurance Co.
Spouse American total
Fidelity months 12 523.60 02/16/02
Assurance Co.
During 2002, Mr. Frahm, as Ms. Frahm’s employer, issued to
Ms. Frahm certain checks that were drawn on the business checking
account to pay her certain wages and to reimburse her for the
premiums for Mr. Frahm’s Wellmark Secure Blue Select policy, the
premiums for Ms. Frahm’s Conseco policy, the premiums for Ms.
Frahm’s long-term care policy, the premiums for Mr. Frahm’s long-
term care policy, and the noninsurance medical expenses that she
paid during that year.
Petitioners timely filed Form 1040, U.S. Individual Income
Tax Return (return), for each of their taxable years 2000 (2000
return), 2001 (2001 return), and 2002 (2002 return). Petitioners
included Schedule F as part of the 2000 return (2000 Schedule F),
the 2001 return (2001 Schedule F), and the 2002 return (2002
Schedule F). Each such Schedule F pertained to Mr. Frahm’s
farming business. Petitioners claimed, inter alia, deductions of
$10,182, $14,948, and $13,961 for expenses for “Employee benefit
programs” in the 2000 Schedule F, the 2001 Schedule F, and the
2002 Schedule F, respectively.
On June 7, 2005, respondent issued to petitioners a notice
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Last modified: March 27, 2008