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Boston University School of Law




Administration of the medical expense deduction has generated its share of litigation and rulings. The major areas of dispute center on two questions. By far the more important question is how to distinguish deductible medical expenses from other expenses that should be characterized as personal, living, or family expenses. The statutory definition of medical care is a broad one, encompassing amounts paid for "diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body."' 10 It also includes transportation to obtain medical care." Because normal expenses of a personal nature, such as nourishing food, fall literally within this language, an overbroad construction of the deduction would swallow up many otherwise nondeductible living expenses. The need to distinguish medical from personal expenses arises in two contexts. First, some expenditures provide a measure of medical improvement to the recipient but also may be sought by other individuals in the ordinary course without health care motives. Thus, the regulations have long provided that a relaxing vacation, although beneficial for one's general well-being, is not a deductible medical expense.12 Second, a taxpayer may pay for services or procedures outside the ordinary course of medical treatment but which provide little amusement, pleasure, or personal gratification as generally understood. As to the latter payments, the Internal Revenue Service tends to allow deductions liberally; it does not require the taxpayer to follow orthodox medical procedure as a condition of deductibility.13 For example, acupuncture treatment is deductible even though the practice may not be sanctioned by practitioner licensing or long prior usage.

A second issue is whose medical expenses a taxpayer may deduct. The statute permits a taxpayer to deduct his own medical care expenses as well as those of his spouse and dependents. Dependency is determined in accordance with the rules for personal exemptions.15 Because the cost of medical care easily can exceed the $750 deduction for an additional exemption, the importance to the taxpayer of determining dependency status may be far greater for this purpose than for personal exemptions.

A third issue-when to deduct an expenditure for medical care which will benefit the taxpayer over several years-has not been a major source of dispute. The regulations 16 depart from the usual capitalization rules applicable to trade or business property. For the latter, deductions for capital expenditures generally must be spread over the useful life of the asset through depreciation rather than deducted at the time of expenditure. 17 Capital items purchased for health care, however, entitle the taxpayer to- a current deduction of the full amount of the expenditure, reduced only by the enhancement in value to other property by reason of the expenditure. The regulations use as an example a taxpayer who installs an elevator in his home on the advice of a physician so that his wife, who has heart disease, will not have to climb stairs.18 If the installation cost is $1000, and the residence increases in value by $700, the taxpayer may deduct the difference of $300 when the expenditure is made. In following a current deduction rule, the regulations eliminate a host of depreciation-related issues such as questions of useful life and salvage value. In addition, they implicitly foreclose inquiry into whether the taxpayer makes some nonmedical use of the improvement and obviate the need to allocate between medical and other uses. The taxpayer is also spared the recordkeeping necessary to keep track of the deductions over time. Presumably, the initial requirements-that the capital expenditure be directly related to medical care and that enhancement to other property be subtracted-are deemed under the regulations to provide adequate safeguards against abuse.

This paper explores the resolution of these definitional problems in a number of factual settings, arranged in order of the individual's life cycle. The problem of personal expenditures appears in each section, dependency in sections II and VII, and capital expenditures in section VI.

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