Rev. Rul. 57-489

The Internal Revenue Service has been requested to state its position with respect to the deductibility of the tax imposed under section 3111 of the Federal Insurance Contributions Act (chapter 21 of subtitle C of the Internal Revenue Code of 1954) on an employer, in connection with wages paid to a nurse as a medical expense.

A taxpayer, whose wife is a bed patient at home and requires the constant attention of a nurse, pays the nurse wages, as a result of which there is an excise tax imposed on him under section 3111 of the Act.

Section 213 of the Internal Revenue Code of 1954 reads, in part, as follows:

(a) ALLOWANCE OF DEDUCTION.-There shall be allowed as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent * * *.

Amounts paid for nursing services, including nurse's board where paid by the taxpayer, are generally accepted as payments for medical care. The question arises whether payments of this excise tax are to be considered an integral cost of nursing services and thereby deductible as payments for medical care under section 213. The fact that section 164 prohibits the deduction of taxes imposed under the Federal Insurance Contributions Act, as `taxes' in arriving at taxable income, does not prevent the payments of the tax from being deductible under another section of the Code.

Accordingly, it is held that the tax imposed on employers by section 3111 of the Federal Insurance Contributions Act (chapter 21 of subtitle C of the Internal Revenue Code), necessitated by an expenditure which qualifies as a medical expense, are deductible under section 213 of the Internal Revenue Code of 1954, to the extent provided therein, as an integral part of such expense.