Arthur L. Rubin wrote:
- quote -

Nope, no regulations on the matter after all of these years.
And until there are, the courts will uphold any reasonable
interpretation. In my view, that would "bootstrap" Revenue
Ruling 61-146 as a reasonable interpretation of what a plan
is. After all, the IRS is going to attempt to argue with a
straight face in court that their own ruling is not a
reasonable interpretation of the term and therefore the
taxpayer shouldn't have relied on it?

--
Ed Zollars, CPA
Phoenix, Arizona

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sheesh3[at]yahoo.com <sheesh3[at]yahoo.com> wrote:

- quote -

If she is implying that the plan must be non-discriminatory,
she is wrong. Hopefully you got her "badge number" (or
whatever they call it) so that you can call her back and ask
for some code sections to back up her statements. (Don't
hold your breath... <g> )

MTW

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sheesh3[at]yahoo.com wrote:

- quote -

Still no regulations to that effect, are there, Ed?

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sheesh3[at]yahoo.com wrote:

- quote -

And that advice is worth zero <grin> , except getting your
client out of penalties (which, of course, given the answer
couldn't exist since they denied the deduction).

On the other hand, Rev. Rul. 61-146 is binding on the IRS
and there the IRS told us that reimbursing expenses
qualifies as a "plan" for purposes of the exclusion under
Section 106--and that provides an exclusion for
"employer-provided coverage under an accident or health plan."

Section 162(l)(2)(A) has a virtual "throw-away" reference to
a plan solely in terms of defining the income from the
business limitation. I would argue that the IRS would have
a difficult time sustaining a position that a plan that
would qualify under Section 106, as interpreted by Revenue
Ruling 61-146, would fail under Section 162(l)(2)(A).

--
Ed Zollars, CPA
Phoenix, Arizona

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"Ed Zollars, CPA" <ezollar[at]mindspring.com> wrote:
- quote -

I finally called today and talked to someone about this at
the IRS. She said that the plan must be a true Biz Health
Insurance plan, such as one that would cover other employees
hired by the Sched. C company.

This kicks out my TP, and I suspect many others.

bex

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sheesh3[at]yahoo.com wrote:

- quote -

For the net, probably the better way to look for it is under
its formal title--it's Title 26 of the United States Code.
So find the US Code, go to Title 26 and you've found the
Internal Revenue Code.

Unfortunately, the versions I know of that are available for
*free* are all dated--you'll find three listed at:

http://www.findlaw.com/casecode/uscodes/

The most recent one there, though, is dated from early 2002.

- quote -

No, that's not what I said. Rather, you could do that if
and only if you are not eligible to be covered by a
subsidized health insurance plan.

- quote -

Well, close <grin> . We have the indirect requirement that
it paid under a plan established for the Schedule C business
but, as I note, that isn't *that* difficult to manage.

- quote -

The month by month test only deals with whether you are
covered by an employer sponsored subsidized plan.

- quote -

Well, it appears that you could do so simply adopting a plan
saying you would cover the medical insurance costs of the
owner. Putting it in writing probably wouldn't be a bad
idea, but then again I don't know that anyone has had the
IRS actually ask for that on exam. The court cases that
have come down that I've seen have all been for individuals
that clearly weren't qualified for the deduction anyway. So
while there have been a few comments in passing about the
plan and its need to exist, reality was that was never a
deciding factor in those cases.

--
Ed Zollars, CPA

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"Ed Zollars, CPA" <ezollar[at]mindspring.com> wrote:
- quote -

First, a dumb question: Where can I read the IRC Code? I
cannot seem to find it on the IRS site.

Now the really dumb question: I am interpreting your comment
to mean that the TP couldn't be an independent contractor
with one company, and doing the same work under a W2 with a
different company and take this deduction. If however, the
SE work was completely different from the W2 work they
could. Is this right?

- quote -

Based on this statement, in isolation, it would seem that
any profit making Sched C taking TP could deduct their
Health Insurance costs as long as they have no benefits from
a W2 employer during the year. This can't be right.

- quote -

None, I was abstracting a month-by-month test which seemed
to exist based on the 1040 instructions for Line 29.

- quote -

This was actually going to be my next question. How would
the TP have gone about properly establishing the plan "under
the self-employed biz?" In this case, TP just called up
BCBS and said, I need insurance. In fact, they may have had
the insurance in place, prior to the first time they did SE
work.

Thanks,

bex

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sheesh3[at]yahoo.com wrote:

- quote -

Section 162(l) governs, and it allows a deduction for any
month in which someone who "is an employee within the
meaning of section 401(c)(1)" which, under the wonderful
logic of the IRC, means the person is self-employed and not
an employee with regard to some trade or business to which
he/she is involved <grin> .

- quote -

Well, there's no requirement in either 162(l) or 402(c)(1)
that creates a "month by month" test for this definition--so
you are "in" for the full year if you are self-employed for
a single day.

- quote -

Again, where is your authoritative support for that position?

The only month by month test involves being qualified for
employer provided subsidized coverage, which disqualifies
the taxpayer for that month.

Now, the amount does appear to have to be paid under the
plan established for that self-employed business, but given
the rather liberal rulings on what can qualify as a plan for
purposes of an employer plan, that may not be a major
problem--just one to avoid "foot faulting" on <grin> .

--
Ed Zollars, CPA
Phoenix, Arizona

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A related situation has come up for me.

TP has been paying his own health insurance all year.
During parts of 2003 he was both self-employed (Schedule C
contractor) and working for a W2 company with no benefits.
Can he claime the health insurance deduction for those
months?

During some months of the year he was not working for the w2
company, and was available for self employed work, but
received no work. I am reading that as no deduction.

Finally, during the last few months of the year, he was with
a different w2 company but did no SE work. Again, I read
that as no deduction.

The real question arises out for the time he did both.

Does this TP have any deduction what so ever?

bex

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I file Schedule C and am over 65. May I deduct the Medicare
premiums on page one of the 1040? No other earned income or
insurance plans.

Thanks

-Don

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