Ivan G. and Rosemary J. Snorek - Page 5

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               In addition, taxpayers may fully deduct all ordinary and               
          necessary expenses paid or incurred during the taxable year                 
          carrying on a trade or business.  Sec. 162(a).  Ordinary and                
          necessary business expenses include the reimbursement of employee           
          benefit plan expenses to an employee for expenses the employee              
          pays or incurs.  Sec. 162(a)(1); sec. 1.162-10, Income Tax Regs.            
          The deductibility of health insurance costs paid or incurred by             
          self-employed individuals, however, is subject to the special               
          rules of section 162(l).  For 2001, self-employed individuals are           
          allowed to deduct only an amount equal to 60 percent of the                 
          amount paid or incurred during the year for health insurance.               
          Sec. 162(l)(1)(A) and (B).                                                  
               Respondent argues that Mrs. Snorek, a self-employed                    
          individual, paid her own health insurance premiums, and therefore           
          the premium payments are only 60 percent deductible under section           
          162(l).  Petitioners counter that Mr. Snorek, an eligible                   
          employee under the plan, paid the health insurance premiums for             
          Mrs. Snorek, and further argue that Snorek Upholstery reimbursed            
          him.  They argue, therefore, that the health insurance premiums             
          for Mrs. Snorek are fully deductible as an ordinary and necessary           
          business expense.  We disagree.                                             
               Petitioners failed to provide evidence that Mr. Snorek, the            
          eligible employee, paid the health insurance premiums for Mrs.              
          Snorek or that he was reimbursed by Snorek Upholstery for that              






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