Facts
Peggy had been a chain smoker of tobacco. It is this issue and the death of her father from lung cancer that made her join the Norwood tobacco program to try and stop the habit. Peggy has spent a huge amount of money on nicotine patches and other non-prescription treatments, though with not much success. It is through this program that she is spending a lot of her money hence needs to know how the money is to be deducted from her gross income before taxation by the internal revenue authority.
Issue
Whether any of the vast amounts of money spent on the cure and rehabilitation are to be added to the gross income and hence deductible by the internal revenue authority.
Conclusion
The sum of money spent by Peggy for the smoking rehabilitation program and any other monies spent on the drugs prescribed to increase the nicotine withdrawal are deductible under § 213 of the internal revenue bulletin. It is proved beyond doubt that nicotine is addictive and very dangerous to somebody’s health. However, over-the-counter purchases of treatments e.g. of nicotine patches and chewing gum are not deductible as they are not prescribed by a physician, which is a necessity for qualification for deductibility under §213(b) of the act.
Analysis
A request for a Technical Advice Memoranda or a Technical Expedited Advice Memoranda must include the facts for which the memorandum is being applied for. These technical advice memoranda or technical expedited memoranda should include a letter that explains al the laws that support the situation that Peggy in going through. All the letters to be submitted to the pre-submission conference have to be thoroughly discussed.
Medical care is defined as the treatment, diagnosis and prevention of illness. Health care is done by professionals like doctors, dentist nurses, pharmacists and the amount of money spent on all the requirements like prescribed drugs and paying of the professionals is part of the medical care expense. This is exclusive of some other expenditures which, though are related to the health of a person, are not mandatory hence not taken care of during taxation.
Expenditures such as vocational expenditures are not considered as medical care. This is because these expenditures are only beneficial to the general health of an individual but not mandatory for somebody’s health requirement. This is stated in section 1.213-1(e) (1) (ii) of the internal revenue bulletin. Part two of the same section further states that all other expenditures incurred in the purchase of drugs and medicines whether un-prescribed or over the counter drugs that are not prescribed are not considered as medical expenses hence not deductable in the gross income of the client and therefore money spent on them is taxed.
Any amounts spent by Peggy in the purchase of prescription drugs are excludable from the gross income that is to be taxed by the internal revenue authority under section 105(b) of the revenue act. Nevertheless, amounts spent by the client in the purchase of dietary supplements (e.g. vitamins, minerals) are not excludable from the gross income of the client hence liable for taxation since they are not included in the definition of the term medical care. This scheme is referred to as the self-insured medial payment plan.
The term medicine and drugs is precisely defined as the lawfully procured and generally accepted items that are used either for prevention, cure or improvement of somebody’s health status. This is the definition provided under section 1.213-1(e) (2) of the revenue act. The sections further explains that cosmetics, toiletries and sundry items are not in the category of drugs and medicines hence any amounts spent on the purchase of this items is included in the gross income hence liable for taxation by the internal revenue authority.
Gross income is clearly explained as the receipts and the gains from all the sources subtracting all the goods sold. It includes all incomes from whatever source and is not limited to only the cash received as salary or wage but other sources like funds, charity, handouts and others; this is the amount that is considered as gross income hence liable for taxation by the federal tax rules.
Prescribed drugs and insulin are the only ones which have a provision in the internal revenue bulletin, where the money spent on their purchase of these drugs is deducted from the gross income hence not taxed. A prescribed drug is defined as a drug that needs advice for its use by a physician hence all other drugs bought without the consent of a physician are not prescribed drugs hence amount spent on them is not deductible from the gross income. This information is acquired from the ruling Rev.Rul.2003-58, 2003-22 I.R.B.959.this ruling was made when considering the non-prescribed drugs, if they could be deducted from the gross income of a client as provided for in the §213 act. It was concluded that all the amounts spent on the non-prescribed drugs be part of the gross income hence liable to taxation by the internal revenue authority.
Expenses incurred by the tax payer are defined as expenses paid for themselves, their spouses and the dependants. Some types of expenses are personal e.g. recreation hence can not be deducted from the gross income of a client. This limitation, therefore, provides that only money spent on prescribed drugs is deductable from the gross income.
If Peggy’s employer refunds her of the money she has spent on the purchase of these drugs, the money is deducted from the gross income under section §105(b) of the internal revenue bulletin hence not liable for deduction by the internal revenue authority. This is exclusive of the money spent on other items that are not mandatory for somebody’s health like the food supplement, for instance, vitamins, minerals, and others as they are personally beneficial. Therefore, money spent on these supplements is not deductible from the gross income hence is taxed under §105(b).
Summary
Medical care is defined as the treatment, diagnosis and prevention of illness. Health care is done by professionals like doctors, dentist nurses, pharmacists and the amount of money spent on all the requirements like prescribed drugs and paying of the professionals is part of the medical care expense.
A prescribed drug is defined as a drug that needs advice for its purchase and use by a physician hence any other drug bought without the consent of a physician is not prescribed drug. In this case the drugs that Peggy uses and are prescribed by the doctor or physicians, the money spent to purchase them will be deductable from the gross income hence not liable for taxation by the internal revenue authority. Any amounts spent by Peggy on drugs and other nutritional ingredients that are not prescribed by a physician will not be deductable from the gross income hence liable for taxation by the internal revenue authority.