Tax Court Upholds Rejection of Engineer’s Medical, Charitable Deductions

An engineer’s efforts to deduct several items as medical expenses or charitable contributions proved unsuccessful for a variety of reasons. The US Tax Court ruled that the taxpayer’s bicycle was not a medical expense because she could not prove that it was essential to the treatment of a medical condition, and the taxpayer could not maintain her charitable contributions because she lacked the appropriate contemporaneous records in support of them.

Melanie Thomas-Kozak was an engineer for a division of Sunoco who racked up a large number of deductions on 2008 and 2009 federal income tax returns. These deductions included medical expenses, unreimbursed business expenses, moving expenses, and charitable contribution expenses. The IRS assessed deficiencies of more than $7,000 for each year. The IRS allowed more than $11,000 of the $15,000 the taxpayer claimed in medical expenses. Of the remaining $4,000, the only item the taxpayer addressed in her filing with the Tax Court was a $569 bicycle. Thomas-Kozak claimed that the bicycle was necessary to alleviate a medical condition her doctor diagnosed, in which she has too much adrenalin. The IRS did not dispute the expense but asserted that it did not qualify as a medical expense under Section 213(a). To qualify, a purchase must be “an essential element of the treatment” of the taxpayer’s medical condition, and that the taxpayer would not have made the purchase but for her having the medical condition.

Thomas-Kozak’s bicycle did not qualify. It failed on both fronts. First, the taxpayer’s doctor only ordered her generally to engage in more exercise and did not instruct her to undertake bicycling. The bicycle might have met the “essential element” if the taxpayer could not have partaken in exercise activities other than bicycling, but she had no proof of that. Also, the court hailed the “inherent recreational uses of a bicycle” and concluded that Thomas-Kozak could not establish that she would not have obtained the bicycle but for her adrenalin issue. In short, the court concluded that the bicycle was for the taxpayer’s general health, not specifically and essentially for her adrenalin condition.

Of the taxpayer’s charitable contributions, the IRS disallowed $534 she allegedly contributed to Habitat for Humanity. This amount represented $314 in vehicle expenses and $220 in meals, based upon Thomas-Kozak’s travel between her hometown of Knoxville and St. Louis to work on Habitat projects. Unfortunately for the taxpayer, the only documentation she had backing up these expenses was a spreadsheet she created when she prepared her return. Since the taxpayer’s spreadsheet was neither contemporaneous nor supported by receipts or other written documents, it was insufficient, and Thomas-Kozak was not entitled to deduct the charitable contribution.

Certain categories of itemized deductions, such as charitable contributions and medical expenses, can cover broad ranges of items, but taxpayers should take care to know the limits imposed by the law. For helpful advice about your deduction questions, contact the tax attorneys at Samuel C. Berger, P.C. and CPAs at S.C. Berger, P.C. They can help you to maximize the deductions allowable to you under the law. To consult our attorneys and CPAs, contact us online or call (201) 587-1500 or (212) 380-8117.

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