Court Opinion

ID: 9461439
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:14:37.467369+00
Date Added: 2024-06-11T17:37:03.895965
License: Public Domain

CHRISTENSEN, Senior District Judge
(dissenting):
I agree with the prevailing opinion that plaintiffs-appellants were not entitled to recover for the taxable year 1966, since technically the expenses in dispute for medical care based on depreciation of the automobile were not “paid during the taxable year”.
As to 1967, I think Commissioner v. Idaho Power Co., 418 U.S. 1, 94 S.Ct. 2757, 41 L.Ed.2d 535 (1974), controlling in principle against the position of the government here.
Previous to the years in suit it was necessary for the wife of the taxpayer to be hospitalized for some seven months in the psychiatric unit of the Kansas University Medical Center in Kansas City, Kansas, since she was suffering from a severe depression which had become psychotic. Upon her release by the hospital it was necessary for her to continue treatment in an outpatient status by making trips each week to Kansas City from Junction City, Kansas, during both 1966 and 1967, for the purpose of filling appointments with her doctor, a psychiatrist on the staff of the Medical Center. On January 2, 1967, the taxpayer and his wife purchased a 1967 Ford LTD 4-door sedan at a cost of $4,386.99. This car was used by Mrs. Weary for her medical travel to Kansas City during the year 1967 and primarily for this purpose. The approximate total number of miles driven in this car in 1967 was 30,000 miles; the car was sold back to the motor company on December 30, 1967, at a price of $2,300.00. For 1967 the taxpayer deducted for federal income tax purposes $2,696.16 as medical transportation expense, represented by five cents per mile for mileage driven together with less than 70% ($1,343.16) of the difference *438between the purchase and the selling price of the automobile. While the precise number of miles the car was utilized for other purposes is not revealed by the record, it appears clear that the total depreciation of $2,086.99 was more than fairly discounted on account of any other possible use to reach the taxpayer’s “payment” claim of $1,343.16. The prevailing opinion accepts the fact that “there is no dispute as to the distance traveled during the year for medical treatment for Mrs. Weary, nor that it was for a deductible purpose (26 U.S.C.A. (I.R.C.1954) § 213(e)(1)(B))”. Cf. Orr v. United States, 343 F.2d 553 (5th Cir. 1965) at 558, which indicates that the disallowance turned more on the inadequacy of proof than upon the nature of the claim.
The controlling statute, 26 U.S.C. § 213, provides that “[t]here shall be allowed as a deduction the following amounts . . . (1) the amount by which the amount of the expenses paid during the taxable year . . . for medical care of the taxpayer, his spouse exceeds 3 percent of the adjusted gross income . . . (e)(1) [t]he term ‘medical care’ means amounts paid . . . (B) for transportation primarily for and essential to medical care . . ..”
Because non-business depreciation is not deductible as an “amount paid” for purposes of Sections 213 and 170 of the 1954 Code does not mean that depreciation actually paid in the taxable year involved under the circumstances of this case is not deductible under Section 213. If the car had been rented for the purpose, the government concedes that the amount paid for this rental would be deductible; it seems probable that such rental would have exceeded the amount claimed and paid by virtue of the depreciation, plus the five cents per mile allowed. It seems excessively grudging against the taxpayer to ignore the realities of the actual payment during the single taxable year by applying rigidly a rule adopted for the purpose of other sections of the Code in disregard of the different context of Section 213.
In Idaho Power, supra, “[t]he taxpayer asserts that its transportation equipment is used in its ‘trade or business’ and that depreciation thereon is therefore deductible under § 167(a)(1) of the Code. The Commissioner concedes that § 167 may be said to have a literal application to depreciation on equipment used in capital construction . . . but contends that the provision must be read in the light of § 263(a)(1) which specifically disallows ' any deduction for an amount ‘paid out for new buildings or for permanent improvements or betterments’.”
The provisions of Section 213(a)(1) concerning the amount of expenses paid during the taxable year for medical care of the taxpayer or his spouse for similar reason should be given effect.
In Idaho Power there was “no question that the cost of the transportation equipment was ‘paid out’ in the same manner as the cost of supplies, materials, and other equipment, and the wages of construction workers. ... In acquiring the transportation equipment, taxpayer ‘paid out’ the equipment’s purchase price; depreciation is simply the means of allocating the payment over the various accounting periods affected.”
And the established depreciation in the case at bar was similarly “paid” as a medical expense “during the taxable year”.
For the reasons indicated, and since I see no justification in view of Idaho Power to endow the government with a “heads it wins, tails they lose” position in the treatment of depreciation under the circumstances of this case, I respectfully dissent.