Rev. Rul. 58-280

Advice has been requested (1) whether the cost of special education, training, and treatment given a mentally retarded child in a public or private institution is considered medical care and (2) whether the cost of meals, lodging, and ordinary education, furnished a mentally retarded child attending a special school, is deductible as a medical expense.

Section 213(a) of the Internal Revenue Code of 1954, provides in part that `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 * * *.' Revenue Ruling 55-261, C.B. 1955-1, 307, holds that only the cost of special instruction or training designed to alleviate a physical or mental handicap was allowable as a medical expense. The cost of ordinary educational courses and meals and lodging, which were furnished incidental to the specialized services provided the individual by the school or institution, were not considered a cost of medical care.

However, it is now concluded that where an individual is in an institution because his condition is such that the availability of medical care in such institution is a principal reason for his presence there and meals and lodging are furnished as a necessary incident to such care, the entire cost of medical care and meals and lodging at the institution, which are furnished while the individual requires continual medical care, constitute an expense for medical care. In other words, medical care includes the entire cost of institutional care for a person who is mentally ill and unsafe when left alone.

While ordinary education is not medical care, the cost of medical care is considered to include the cost of attending a special school for a mentally or physically handicapped individual, if his condition is such that the resources of the institution for alleviating such mental or physical handicap are a principal reason for his presence there. In such a case, the cost of attending such a special school will include the cost of meals and lodging, if supplied, and the cost of ordinary education furnished which is incidental to the special services furnished by the school. Thus, the cost of medical care includes the cost of attending a special school designed to compensate for or overcome a physical handicap, in order to qualify the individual for future normal education or for normal living, such as a school for the teaching of braille or lip reading. Similarly, care, supervision, treatment and training of a mentally retarded individual at an institution is within the meaning of the term `medical care.'

Where an individual is in an institution and his condition is such that the availability of medical care in such institution is not a principal reason for his presence there, only that part of the cost of care in the institution as is attributable to medical care shall be considered as a cost of medical care. The cost of his meals and lodging at the institution in such a case are not considered a cost of medical care. For example, an individual is in a home for the aged for personal or family considerations and not because he requires medical or nursing attention. In such case, medical care consists only of that part of the cost for care in the home which is attributable to medical care or nursing attention furnished to him and the cost of his meals and lodging at the home are not considered a cost of medical care.

It is immaterial whether the medical care is furnished in a Federal or State institution or in a private institution.

A distinction must be made, however, in cases involving the costs of sending a problem child to a special school where the curriculum and disciplinary methods employed have a beneficial effect on the child's attitude. Such costs are not includible as a medical expense under either the 1939 Code or the 1954 Code. See Gordon Pascal et ux v. Commissioner , Tax Court Memorandum Opinion entered June 19, 1956.

Accordingly, it is held that (1) the cost of special education, training, and treatment afforded a mentally retarded child in an institution is deductible as a medical expense; (2) the total cost of meals, lodging, and ordinary education, furnished a mentally retarded child attending a special school, is deductible as a medical expense only if his condition is such that the resources of the institution for alleviating such mental or physical handicap is a principal reason for the child's presence there; and (3) it is immaterial whether medical care is furnished in a public or private institution.

Revenue Ruling 55-261, C.B. 1955-1, 307, to the extent that it holds that the cost of meals, lodging, and ordinary instruction or tuition for physically or mentally handicapped persons at schools which specialize in their medical treatment is not deductible as a medical expense, is modified.