ore and more, miracles in research and technology bring hope (and, perhaps, a cure) to those afflicted with chronic illness. Often, the costs of fighting a serious disease can be as—if not more—debilitating than the malady itself. Fortunately, a new IRS ruling provides limited relief for a taxpayer who attends a medical conference concerning a disease the taxpayer, his or her spouse or a dependent suffers from. For the first time, if the taxpayer otherwise qualifies, he or she can deduct certain costs of attending the medical conference when a physician recommends it. CPAs should be aware of this new ruling when advising clients with (or whose spouses or dependents have) a chronic illness.
In revenue ruling 2000-24, IRB 2000-19, a taxpayer lived in City A; his child was chronically ill. The child’s physician recommended that the taxpayer attend a conference in City B sponsored by an association that supports research and education about the child’s disease. The taxpayer’s purpose in attending was to obtain medical information useful in (1) making decisions about the child’s treatment or (2) providing care for the child. The conference was attended by medical practitioners and individuals with the disease and their families. The taxpayer spent the majority of his time in City B attending sessions that disseminated medical information about the disease. Other conference sessions contained presentations or discussion of legal issues, family finances and related matters. Secondarily, the taxpayer engaged in social and recreational activities while in City B.
His expenses included transportation to and from City B, local transportation to and from the conference site, the conference registration fee and meals and hotel lodging while attending the conference.
For federal tax purposes, IRC section 213(a) and (d)(1) allows a deduction for the unreimbursed expenses an individual, spouse or dependent incurs for the diagnosis, cure, mitigation, treatment or prevention of disease—or for the purpose of affecting any body structure or function—if such expenses exceed 7.5% of adjusted gross income (AGI). Under regulations section 1.213-1(e)(1)(ii), the deduction is confined strictly to expenses incurred primarily for the prevention or alleviation of a physical or mental defect or illness. Whether an expense is “primarily” for medical care is a question of fact. An expense merely beneficial to an individual’s general health is not a medical expense.
Under section 213(d)(1)(B), the term medical care includes transportation “primarily for and essential to” medical care referred to in section 213(d)(1)(A). Section 213(d)(2) states that the cost of lodging (up to $50 per night) while a taxpayer is away from home that is primarily for and essential to medical care is deductible. However, such care must be provided by a physician in a licensed hospital or equivalent facility and there can be no significant element of personal pleasure, recreation or travel involved.
On the other hand, regulations section 1.213-1(e)(1)(iv) and (v) says that meals are not deductible medical expenses unless provided at a hospital or similar facility at which the taxpayer, spouse or dependent is receiving medical care.
Before issuing its ruling, the IRS looked at previous rulings on related issues. In revenue ruling 58-533, 1958-2 CB 108, the parents of a child who lived away from home at a psychiatric center could deduct as medical expenses the costs of regularly traveling to and from the center to visit their child. The regular visits were on the advice of the child’s doctors and an essential part of his therapy.
In revenue ruling 76-79, 1976-1 CB 70, a taxpayer sought to deduct the costs of a cruise recommended by his physician. The cruise was staffed by physicians who reviewed passengers’ medical records, performed tests (as directed by each passenger’s personal physician or as indicated by the passenger’s condition) and reported the results to the personal physician. In addition, the medical staff provided instructive seminars relative to each passenger’s medical condition and supervised dietary programs. The IRS ruled that the costs were deductible only to the extent attributable to reviewing the taxpayer’s medical records, performing medical tests and reporting the results to his physician.
Applying revenue ruling 76-79 to the facts at hand, the IRS held in revenue ruling 2000-24 that the conference registration fee and costs of travel to and from the conference in City B were deductible medical expenses. The meals and lodging were nondeductible.
Thus, the IRS ruled that amounts an individual pays for admission and transportation to a medical conference relating to the chronic disease of the individual, spouse or dependent are deductible under section 213 (provided the taxpayer meets the AGI threshold), if the costs are primarily for and essential to the patient’s medical care.
CPAs should note that, even if the taxpayer’s medical expenses for the year do not meet the 7.5% federal threshold, the expenses nevertheless may be deductible at the state level.
Example. Herbert and Wilma, a married couple, live in New Jersey. Their combined 2000 AGI is $90,000. Wilma has liver cancer. On the recommendation of Wilma’s physician, Herbert, who is not a doctor, attends a medical conference on liver cancer given in Florida. His expenses include $400 in round-trip airfare and local transportation and $565 to attend the conference.
The $965 expended is fully deductible as a medical expense for federal tax purposes if Herbert’s and Wilma’s other medical expenses equal or exceed $6,750 ($90,000 x 7.5%). For New Jersey purposes, such expenses must equal or exceed $1,800 ($90,000 x 2%).
THE HAPPY ENDING
In a bleak situation, revenue ruling 2000-24 is good news for clients who are chronically ill or have ill spouses or dependents. It is unclear how broadly the IRS will apply the ruling to other taxpayers who attend what purport to be medical conferences. The burden is on the taxpayer to prove legitimate expenses and actual conference attendance. At the very least, the CPA should advise a client to obtain, in writing, the taxpayer’s, spouse’s or dependent’s physician’s recommendation to attend the conference.
—Lesli S. Laffie, JD, LLM,