Rev. Rul. 67-185

Advice has been requested whether the portion of a monthly life-care fee, paid to a retirement home, which is allocable to medical care is deductible under section 213 of the Internal Revenue Code of 1954.

The taxpayers, a husband and his wife, entered into agreements with a retirement home under which they became entitled to live in the home and to receive lifetime care. They agreed to pay 20 x dollars each month as the life-care fee. The taxpayers proved that on the basis of the home's experience, the life-care fee of 20 x dollars included 6 x dollars for costs of providing medical care, medicine, and hospitalization.

Section 213 of the Code provides that there shall be allowed as a deduction, subject to specified limitations, expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer or his spouse.

Revenue Ruling 54-457, C.B. 1954-2, 100, states that where a university charges a student a lump-sum fee which includes his education, board, medical care, etc., the portion of the charge which is allocable to medical care is considered a proper medical expense deduction if there is a breakdown showing the amount of the fee which is allocable to medical care, or such information is readily available from the university. The principle in that revenue ruling relating to allocation of the fee, is equally applicable to the instant case.

Accordingly, where the taxpayers, a husband and his wife, pay a monthly life-care fee to a retirement home, and prove that a specific portion of the fee covers the costs of providing medical care for them, that portion of the fee is deductible by the taxpayers as an expense for medical care in the year paid, subject to the limitations prescribed in section 213 of the Code.