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Mrs. Francis also ran errands for a farming business
operated by petitioners’ son in 2001. Petitioners’ son did not
treat Mrs. Francis as an employee of his farming operation.
Petitioners’ son performed services on the farm without being
treated as an employee of the farm.
Mrs. Francis submitted an employee benefit expense
transmittal form to the plan, claiming that she had paid $9,502
of eligible medical expenses in 2001. Of this amount, $5,571 was
attributable to premiums paid on a joint Blue Cross/Blue Shield
health insurance policy and a Medicare supplemental policy solely
for Mr. Francis. The farm reimbursed Mrs. Francis for the $9,502
of eligible expenses. Adding the $9,502 medical expenses
reimbursement to the $1,998 wages she received, Mrs. Francis
received $11,500 of total compensation for 2001.
Petitioners filed a joint Federal income tax return for
2001. Petitioners reported income and expenses from the farm on
Schedule F, Profit or Loss From Farming. Petitioners deducted
$9,502 as an employee benefit plan expense. The $9,502 deduction
was attributable to the medical expenses Mrs. Francis paid and
for which the farm reimbursed her.
Respondent sent petitioners a deficiency notice. Respondent
determined that petitioners were not allowed to deduct 100
percent of their medical expenses on Schedule F as ordinary and
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Last modified: May 25, 2011