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On May 15, 2006, petitioners, while residing in Colby,
Kansas, filed their petition with the Court.
Discussion
Section 162(a) allows a deduction for all ordinary and
necessary expenses paid or incurred in carrying on a trade or
business. Ordinary and necessary business expenses include the
reimbursement of employee benefit plan expenses paid or incurred
by employees. Sec. 162(a)(1); sec. 1.162-10, Income Tax Regs.
Petitioners contend that their health insurance and out-of-pocket
medical care expenses are fully deductible. Pursuant to section
162(l), petitioners, however, are allowed to deduct only 60
percent of the amount paid for health insurance in 2001 and 70
percent of the amount paid for health insurance in 2002. Sec.
162(l)(1)(A) and (B). Accordingly, we sustain respondent’s
determinations that petitioners’ health insurance expenses are
subject to section 162(l). In addition, pursuant to section
162(a), petitioners’ out-of-pocket medical care expenses are not
ordinary and necessary business expenses and, therefore, are not
deductible.
Contentions we have not addressed are irrelevant, moot, or
meritless.
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