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and this opinion shall not be treated as precedent for any other
case. The issue for decision is whether, pursuant to section
162(a), petitioners are entitled to deduct expenses related to
employee benefit programs.
Background
Petitioner Leo Stephens and his wife Shawn Stephens operated
a custom harvesting business, Stephens Family, LLC, that
consisted of cutting, hauling, and selling grain (the harvesting
business). Through a joint venture with Mrs. Stephens’s mother,
Clair Schrock, Mr. Stephens also operated a farm on which they
grew various crops and raised 30 to 40 head of cattle.
In January 1995, Mr. Stephens enrolled in a health plan
through Blue Cross/Blue Shield of Kansas. Mr. Stephens was the
named policyholder and his family (i.e., his spouse and his four
children) was covered under the plan. Mr. Stephens paid the plan
premiums out of a joint bank account he owned with Mrs. Stephens.
In December 1998, Mr. Stephens, through AgriPlan/BizPlan, adopted
an employer-provided accident and health plan for employees. The
plan provided for full reimbursement for health insurance costs
to eligible employees and their families. In addition, eligible
employees qualified for reimbursement of up to $15,000 for out-
of-pocket medical expenses. To be reimbursed, eligible employees
were required to submit a transmittal form to AgriPlan/BizPlan
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Last modified: March 27, 2008