Definition — But For

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Medical expenses are an exception to the general rule that personal, living or family expenses are not deductible. Medical expenses include amounts you pay for the diagnosis, cure, mitigation, treatment, or prevention of disease (mental or physical) (Regulation 1.213).

But not every expense is clear cut. What happens when an item you pay for has a dual purpose—both medical and personal?

To determine if these items are deductible, courts have looked to objective factors including why you bought the item, whether a doctor recommended or prescribed the purchase, and the linkage between the item you bought and your medical condition.

In addition, dual purpose items have to pass the “but for” test. That means you would not have incurred the expense but for the fact that you had a medical condition. Put another way, you purchased the item to treat a medical condition and not merely to promote your general health.

Here are four cases where taxpayers claimed medical deductions for dual purpose expenses.

1.

A mechanical engineer who had to travel frequently for her job purchased a bicycle and related accessories because her physician determined that she had excessive adrenaline in her body and recommended that she exercise to alleviate the condition. Her physician did not recommend any particular method of exercise but testified that the bicycle could be set up on a stand in a hotel room and therefore provided a convenient means of exercising during her travels.

The IRS said the expenditure was not a qualifying medical expense.

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The case: T.C. Summary Opinion 2014-104 (Thomas-Kozak)

2.

The taxpayer’s wife attacked and abused him from the beginning of their marriage, and the marriage made him mentally ill, to the point where he was suicidal. His psychiatrist told him that in order to be treatable, he had to obtain a divorce.

To carry out his doctor’s orders, the taxpayer hired an attorney. However, his psychiatrist believed the attorney’s slow, deliberate and aggressive course of action in the divorce proceeding was extremely dangerous for the taxpayer and advised him to change his attorney. Based on the doctor’s recommendation, the taxpayer hired a new attorney. He told the new attorney to submit to his (now) ex-wife’s demands.

Following the divorce, the psychiatrist continued to treat the taxpayer, who began to respond to the treatment, though he continued to suffer from illness in the form of severe depression. After 1-½ years of further continuous treatment, the taxpayer recovered from his illness.

The taxpayer claimed medical expense deductions for “legal and related expenses necessarily incurred to effect the treatment, mitigation, and care of illness.” The deduction included costs for his legal expenses, those of his ex-wife (which he was required to pay by the terms of the settlement agreement), and the amounts specified in that agreement as satisfaction of her property rights.

The IRS said all the expenditures were nondeductible “personal, living, or family expenses.”

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The case: Jacobs v. Commissioner 62 T.C. 813 (1974)

3.

The taxpayer, a sixty-six year old widow, was being treated by her physician for arthritic pains in her back and neck and for nervous tension. She took dance lessons at an Arthur Murray Studio as recommended by her physician as a form of therapy for her arthritic pains and to help relax tensions.

The expense was disallowed by the IRS on the basis that dance lessons are personal expenses and not medical expenses under Section 213.

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The case: France v. Commissioner No. 80-1660 (1982)

4.

The taxpayer, a retired IRS employee, lived in New York City before moving to California. The taxpayer had hypertension, a prostatic condition, a possible hernia, and other medical conditions. His internist, who lived in New York City, advised the taxpayer to have periodic checkups, at least once or twice a year.

The taxpayer did not have an internist in California, and he made trips annually to New York for a checkup. He planned his trips to coincide with his wife’s business trips in her occupation as a buyer for a retail store. During the trips his wife’s time was fully occupied by her business activities and she had little or no time for vacation-type activities with the taxpayer, nor did he engage in such activities. He visited no night clubs or resort areas.

The taxpayer said his primary purpose in making the trips to New York City was to go to his internist for professional services, and to such other physicians in New York at the same time as his internist might recommend. He would not have made the trips but for his expectation of having a thorough physical examination by the internist, in whom he had confidence.

The overall time required for a checkup on the trips was about 10 days, his final visit being for the purpose of discussing laboratory findings and the like. On each of the trips his social and recreational activities were minor and secondary to his medical visits.

He deducted the travel and other expenses related to the trips as medical expenses.

The IRS disallowed the deductions, stating “expenses to New York City and return to Los Angeles are disallowed for the reason that each annual trip was not taken primarily for medical purposes. Hence such were personal expenses and are not allowable as a deduction.”

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The case: Winderman v. Commissioner 32 TC 1197 (1959)

***

HL Carpenter, an experienced investor and a CPA, specializes in reader friendly articles on taxes and investing for individuals and small businesses, and publishes two newsletters: Taxing Lessons and Top Drawer Ink. Visit TaxingLessons.com and HLCarpenter.com.

This information should not be considered legal, investment or tax advice. Taxing Lessons and Top Drawer Ink Corp. do not provide legal, investment or tax advice. Always consult your legal, investment and/or tax advisor regarding your personal situation.

***

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For the IRS.
Even accepting the taxpayer’s contention that she had an excessive adrenaline condition, she has not shown that bicycle exercise was essential to the treatment of that condition. Indeed, she conceded her physician’s recommendation was for more exercise generally rather than bicycle riding specifically.

She did not produce evidence indicating she could not engage in other methods of exercise. Given the inherent recreational uses of a bicycle, we conclude the taxpayer has not shown the bicycle would not have been purchased “but for” her medical condition.

Instead, we conclude the expenditure was only beneficial to her health generally and therefore does not qualify as medical care.

Sorry, wrong answer :(
Right answer!
For the IRS.

While we are convinced the taxpayer’s condition worsened and that, because of his marriage, he could not be successfully treated psychiatrically, we are also satisfied he would have made the expenditures here in issue even if he had not been ill.

The marriage had not worked from the beginning. The taxpayer detailed for us how his wife began to attack and abuse him almost immediately after the wedding. Even if he had been emotionally sound, we believe he would have gotten a divorce, if not when he did, then shortly thereafter.

Moreover, there is absolutely no evidence that his wife would not have at some point initiated and procured a divorce.

In short, we cannot say the taxpayer would not have in any event incurred the expenditures in question.

Keeping in mind that the provisions of section 213(a) and (e) (1) (A) “should be narrowly construed” where, as is the case herein, the expenditures involved “are conventionally understood to be personal, living, or family expenses”, we conclude the taxpayer’s expenditures are not deductible “medical expenses” under the meaning of section 213.

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Right answer!
For the IRS.

The taxpayer failed to establish that the dance lessons bear such a direct and proximate therapeutic relation to some physical or mental function or structure of the body as to constitute a deductible medical expense.

The fact that the dance lessons were beneficial to the taxpayer does not render an otherwise personal expense deductible under the “medical care” provision of the code. It is not unusual for doctors to recommend to a patient a course of personal conduct and activity which will result in health benefits, but those expenses are generally considered ordinary personal expenses.

 Right answer!
Sorry, wrong answer :(
For the Taxpayer.

We heard the evidence and were fully satisfied that the taxpayer’s sole purpose in making the trips was to consult his internist professionally. He had confidence in his internist, and we know of no rule of law that would require him to seek out another physician in Los Angeles as a substitute. His trips to New York were made with the bona fide intention of obtaining the professional services of his internist. The expenses in controversy are deductible.

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