User Name: Bobby Rodrigo

Date and Time: Sep 05, 2016 17:47

Job Number: 36659899

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1. 1971 IRB LEXIS 70
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Bobby Rodrigo

Rev. Rul. 71-281; 1971-2 C.B. 165; 1971 IRB LEXIS 70

US Internal Revenue Service
July 1971
Reporter
1971 IRB LEXIS 70; Rev. Rul. 71-281; 1971-2 C.B. 165

Revenue Ruling 71-281

Subject Matter
Section 213.-Medical, Dental, etc., Expenses

Applicable Sections
26 CPR 1.213-1: Medical, dental, etc., expenses.
[*1]

Core Terms
medical care, amount paid, legal fees, mental institution, medical expenses, medical treatment, legal expenses,
guardianship, confinement, mental illness, compulsory, emotional, diagnose, mitigate, disease, therapy, revoke,
cure

Text
The Revenue Service will follow the Carl A. Gerstacker decision that legal fees necessary to authorize medical
treatment for mental illness are deductible medical expenses; Revenue Ruling 68-320 revoked.
The Internal Revenue Service has reconsidered its position announced in Revenue Ruling 68-320, C.B. 1968-1,
93, that legal fees paid by a taxpayer in connection with the commitment of his son to a state mental institution are
not amounts paid for medical care within the meaning of section 213 of the Internal Revenue Code of 1954.
In Revenue Ruling 68-320 the taxpayer's son suffered a severe mental breakdown making it necessary for him to
leave college and be hospitalized. Because the taxpayer considered it necessary to have the boy confined in order
to treat him, he took the necessary steps to have him committed to a state mental institution. He paid attorney's
fees in connection with the commitment, and deducted such amounts as medical expenses under section 213 of
the Code. Although not specifically stated in Revenue Ruling 68-320, it was understood that the commitment
proceeding was necessary [*2] to render medical treatment to the taxpayer's son, and that the doctors who
recommended that the son be committed regarded the compulsory confinement as a necessary part of his therapy.
The term "medical care" is defined in section 213 (e) (1) of the Code as meaning amounts paid(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any
structure or function of the body,
(B) for transportation primarily for and essential to medical care referred to in sub-paragraph (A), or
(C) for insurance* * * covering medical care referred to in subparagraphs (A) and (B).
Bobby Rodrigo

Page 2 of 2
1971 IRB LEXIS 70, *2
In holding that the legal fees paid by the taxpayer in connection with the commitment of his son to the state mental
institution were not amounts paid for medical care within the meaning of section 213 (e) (1) of the Code, the
Revenue Ruling relied, in part, on the case of Carl A. Gerstacker v.Commissioner,49 T.C. 522 (1968).
The facts in the Gerstacker case disclosed that the taxpayer's wife had a history of mental and emotional problems
involving violent behavior and alcoholism and that she ran away from two mental institutions after voluntarily
entering them. Her doctors advised her [*3] that she could not be successfully treated unless she were committed
in order that the treatment be continuous. The question presented was whether the taxpayer was entitled to deduct
as a medical expense under section 213 of the Code, amounts paid for legal services relating to guardianship
proceedings for the taxpayer's wife which enabled her to receive treatment at a sanitarium for her mental and
emotional condition. The court held that the legal expenses were not deductible as medical expenses and stated
that the provisions of section 213 (e) (1) of the Code must be narrowly construed and that a sharp distinction be
made between direct and indirect expenses relating to medical care.
However, the position of the Tax Court of the United States in the Gerstacker case was reversed by the United
States Court of Appeals for the Sixth Circuit, 414 F. 2d 448 (1969). The Court observed that the compulsory
confinement of the taxpayer's wife was a part of her therapy and, hence, there was a direct or proximate
relationship between a part of the legal expenses and the treatment. Accordingly, the Court held that where legal
expenses are necessary to authorize a method of medical treatment for [*4] mental illness, they are "amounts paid*
* * for the diagnosis, cure, mitigation, treatment,* * * of disease" and are deductible under section 213 of the Code
as expenses for "medical care." The Court further held, however, that legal fees attributable to the management of
the guardianship estate, and the legal fees for the conduct of the affairs of the taxpayer's wife during the
guardianship are not deductible as expenses paid for "medical care" under section 213 of the Code.
The Internal Revenue Service will follow the decision of the Court of Appeals for the Sixth Circuit in the Gerstacker
case. Accordingly, Revenue Ruling 68-320 is hereby revoked.
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Bobby Rodrigo