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Heard v. Commissioner of Internal Revenue

decided: August 12, 1959.

DRAYTON HEARD AND ELIZABETH A. HEARD, PETITIONERS,
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.



Author: Mclaughlin

Before BIGGS, Chief Judge, and MCLAUGHLIN and STALEY, C2rcuit Judges.

MCLAUGHLIN, Circuit Judge.

Petitioners ask for review of a decision of the Tax Court, 30 T.C. 1093 (1958), which held that the premiums paid by taxpayer for old line health and accident policies are a medical deduction under § 23(x) of the 1939 Internal Revenue Code as amended 26 U.S.C. 1952 ed., only to the extent that they are applied to medical or hospitalization coverage. Petitioners also except to the determination that mailing before midnight of the final day of the allowed period is not a "filing" under § 294(d)(1)(A), 26 U.S.C.; that double penalties for underestimation and untimely filing may be assessed against him, § 294(d)(1)(A) and § 294(d)(2), 26 U.S.C.; and that for the purpose of computing additions to the tax it would be assumed that the ultimate liability for the year accrued in equal quarters. The taxable year involved is 1953.

Deductions for Medical Care.

In 1953, § 23(x) controlled deductions for medical care. It made deductible from gross income "Expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent * * *." As to "medical care" it stated:

"* * * The term 'medical care,' as used in this subsection, shall include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body (including amounts paid for accident or health insurance). * * *" (Emphasis supplied.)

The words of the above statute are to be given their normal meaning without striving to read exceptions into them. Deputy v. Dupont, 1940, 308 U.S. 488, 493, 60 S. Ct. 363, 84 L. Ed. 416; Blaess v. Commissioner, 1951, 28 T.C. 710. Despite the incorporation of the phrase "* * * amounts paid for accident or health insurance" into the definition of "medical care", the Commissioner insists that the fair and natural meaning of § 23(x) is not what it says but that in some fashion it eliminates amounts paid for accident and health insurance to provide indemnity for loss of life, limb, sight and time from inclusion under the statutory definition of expenses paid for "medical care". It is asserted in respondent's brief that this statement is supported by the Senate Finance Committee Report (S. Rep. No. 1631, 77th Cong., 2nd Sess., pp. 95-96) accompanying the Revenue Act of 1942. The brief goes on to say:

"That Report states in part:

"The term 'medical care' is broadly defined to include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. It is not intended, however, that a deduction should be allowed for any expense that is not incurred primarily for the prevention or alleviation of a physical or mental defect or illness."

The next following sentence of the report, which is not quoted in the brief, reads:

"Although a deduction is denied with respect to such expenses as are compensated for by insurance or otherwise, amounts paid for accident or health insurance are included in the category of medical expenses." (Emphasis supplied.)

The Senate Report by this statement unmistakably indicates that the direct language of the parenthetical clause of § 23(x), which includes amounts paid for accident or health insurance as proper deductions under medical care, is no inadvertence but the considered decision of the Senate Finance Committee which was adopted as proposed.

Whatever the Tax Court's current attitude may be towards the 1939 Code's specific designation of accident or health insurance premium payments to be deductible, in 1952 it held that the Commissioner had erred in disallowing as a deductible item, a health and accident premium payment. Concerning that payment it said, "It is clearly allowable as an item of total expenditure for medical expenses under Section 23(x), Internal Revenue Code." Taylor v. Commissioner, 1952, 11 T.C.M. 652, 655. (Emphasis supplied).

The 1954 Code continues § 23(x) as § 213, 26 U.S.C.A. § 213. The continuance of the full deductibility of paid accident and health insurance premiums was patently no oversight. This is revealed forcibly by the fact that when in §§ 104 and 105 of the 1954 Code, 26 U.S.C.A. §§ 104, 105, the Congress wished to break down accident and health coverage into its separate items it did so in so many words. In both sections exclusions are granted for accident and health items "* * * except in the case of amounts ...


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