Baker v. Commissioner
United States Tax Court
122 T.C. 143 (2004)
- Written by Liz Nakamura, JD
Facts
Delbert and Margaret Baker (plaintiffs) resided at Air Force Village West (Village West), a continuing care retirement community (CCRC) in California. Village West provided four levels of care, a pool, and other recreational facilities. The Bakers paid a one-time entrance fee plus ongoing monthly service fees to Village West. The monthly service fees covered emergency nursing care, nonemergency outpatient services, and, if needed, reduced-cost beds in the Village West skilled nursing facility. In 1997 and 1998, the Bakers claimed a percentage of the monthly service fees on their joint tax returns as medical care expense deductions. The Bakers calculated the percentage of the monthly service fees attributable to medical expenses by using the percentage method. The Bakers also deducted the percentage of the monthly fees attributable to the pool, claiming that Delbert’s doctor had prescribed regular swimming to help manage his various medical conditions. The commissioner of the Internal Revenue Service (IRS) (defendant) issued a deficiency notice, stating the Bakers’ claimed medical expense deductions were too high. Even though the IRS regularly used the percentage method to calculate CCRC medical care deductions, the IRS argued the Bakers should have used the actuarial method. The IRS claimed using the actuarial method would have resulted in a lower deduction. At trial, the IRS conceded that the Bakers maintained sufficient records to support a deduction claim but challenged the credibility of the Bakers’ evidence and calculations.
Rule of Law
Issue
Holding and Reasoning (Goeke, J.)
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