Income Tax Research

Facts

The facts of this case are that Joe Johnson, age 62, suffers from a severe case of degenerative arthritis. His doctor has prescribed him to swim in a swimming pool at least one hour per day as treatment and to prevent any further muscle deterioration. Mr. Johnson has no swimming pools in his neighborhood so he decided to build one at his home. He also had the bottom and the sides tiled in his favorite color, mountaineer red. This extra amenity costs Mr. Johnson an extra $1,300.00. The total cost of the pool is $21,000.00, including the $1,300.00 for the red tile. It was estimated by an independent appraiser that the pool increased the value of his home by $1,200.00 and he is the only person in his family that uses the pool.

Issue

The issue at hand in this case is if Joe Johnson can deduct from his income taxes any of the $21,000.00 costs incurred by constructing the pool. These costs would be deductible as a medical expense.

Conclusion

My conclusion is that Mr. Johnson can deduct $18,500.00 ($21,000 minus $1,200 minus $1,300) as a medical expense from his income taxes. He may not deduct the $1,300.00 for the red tile because it does not benefit his medical condition. He also may not deduct the $1,200.00 for the increased value of his home.

Reasoning and Authorities

As described in IRC Sec. 213 (d)(1)(A) “the term medical care means amount paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” This IRC code section states that Joe Johnson may deduct part of the $21,000.00 expenses incurred from the construction of the pool at his house.

Section 1.213-1(e)(1)(iii) states that “a capital expenditure for permanent improvement or betterment of property that would not ordinarily be for the purpose of medical care may, nevertheless, qualify as a medical expense to the extent that the expenditure exceeds the increase in the value of the related property, if the particular expenditure is related directly to medical care. Because the increase of value for his home is not directly related to medical care it is not deductible. Rev. Rul. 54-57, 1954-1 C.B. 67 “holds that a deduction is not available for capital expenditures that increase the value of the taxpayer's