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It is respondent’s position that the insurance premiums that
remain at issue are personal expenses and therefore are not
deductible as ordinary and necessary business expenses under
section 162(a). In support of respondent’s position, respondent
argues:
Employee Benefit Plan expenses claimed on the Schedule
F are deductible as ordinary and necessary expenses
paid pursuant to an employee benefit plan if the medi-
cal and insurance expenses are attributable to the
employee.
* * * * * * *
Respondent does not dispute the existence of an
agreement between Ralph Frahm, as employer, and Erika
Frahm, as employee, that provided that the employer
would provide health insurance benefits to the em-
ployee. Respondent does not dispute that Erika Frahm
was an employee of Ralph Frahm. Respondent does not
dispute that Erika Frahm worked sufficient hours at a
sufficient wage rate to qualify for health insurance
benefits. Respondent does dispute that the actual
health insurance policy purchased by petitioners, in
Ralph Frahm’s name, which provided coverage for Erika
Frahm, was an ordinary and necessary business expense.
* * * Petitioners’ expenses bore no relation to
Ralph Frahm’s farming business. His only employee
received the health benefits giving rise to the dis-
puted expenses by virtue of her marital relationship
with Ralph Frahm, and not by virtue of the employment
relationship.
* * * The family relationship - not the employment
relationship - was the means by which the health insur-
ance coverage reached Erika Frahm. Erika Frahm would
not have received the benefit of health insurance
coverage under the policy purchased if she had not been
Ralph Frahm’s wife. But, she would have received the
benefit as his wife regardless of whether she was Ralph
Frahm’s employee.
* * * * * * *
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