Taxpayer Can Deduct Payments for Alternative Medical Care

(Parker Tax Publishing March 2017)

In a bench opinion, the Tax Court held that a taxpayer could deduct amounts paid for alternative medical treatments not routinely or universally recognized. In reaching its conclusion, the court took into account not only what was known but what was less understood as well; namely, the role that an individual's state of mind plays in the treatment of the individual's disease. Malev v. Comm'r, No. 1282-16S.

Victoria Malev suffers from at least one spinal disease. She received only partial and temporary relief from the pain associated with the disease through chiropractic treatments. In 2012, Malev subscribed to various forms of treatment from four individuals, none of whom would be commonly recognized as a conventional medical caregiver. In fact, the treatments could be referred to as "alternative medicine." Malev sought alternatives to conventional treatment because she was concerned that conventional treatments for her condition posed too much risk, or would be ineffective. Malev incurred expenses for these alternative treatments, which she said had cured her. The payments for the treatments were not reimbursed by insurance and Malev deducted them as medical expenses on her 2012 tax return. In October of 2015, the IRS determined that Malev could not deduct the payments as medical expenses, assessed a deficiency, and imposed a Code Sec. 6662(a) penalty. Malev disputed the IRS's rejection of her medical expense deduction and took the case to the Tax Court.

In 2016, after Malev received the IRS's notice of deficiency but before the Tax Court proceeding, Malev's doctor suggested surgery as a remedy to her medical issues, but advised Malev that the surgery did not come with a guarantee of complete success, and carried the possibility of worsening her condition. Malev's doctor further recommended "integrative medical care." Integrative medicine, according to Duke University, is an approach to care that puts the patient at the center and addresses the full range of physical, emotional, mental, social, spiritual, and environmental influences that affect a person's health. Employing a personalized strategy that considers the patient's unique conditions, needs and circumstances, it uses the most appropriate interventions from an array of scientific disciplines to heal illness and disease and help people regain and maintain optimum health.

In a bench opinion, the Tax Court held that Malev could deduct the payments for alternative medicine as a medical expense. The court noted that Malev had testified that her condition had greatly improved as a result of the alternative treatments. Had the 2016 diagnosis been given before 2012, the court said, the case would be easy to resolve because that diagnosis included a recommendation that Malev pursue "integrated medical treatment." According to the court, such a recommendation, having been made by a recognized medical professional, would probably in and of itself support a deduction for expenses paid to seek such care.

But, as the diagnosis came after Malev filed her 2012 tax return, it seemed to the Court to undermine, at least to some extent, Malev's claim to have been cured by the treatments she had received several years earlier. This put the court in a difficult position. To resolve the issue, the court decided to take into account not only what was known but what was less understood as well; namely, the role that an individual's state of mind plays in the treatment of the individual's disease. The court thus considered (1) the literal language of Code Sec. 213 and its underlying regulations; (2) Malev's sincere belief that the expenses she paid for the treatments she received were directed to cure or mitigate the symptoms of her spinal disease; (3) the expenses incurred were not of the type that an individual would routinely incur for non-medical reasons; (4) the fact that nothing in the record suggested that Malev's relationship with any of the four individuals whom she paid for the services was other than professional; and (5) its prior recognition that expenses paid for "alternative medical" treatments can be deducted as a medical expense under Code Sec. 213.

The court focused not only on what Code Sec. 213 and the related regulations require to support a medical expense deduction, but on what is not required as well. Citing its decision in Tso v. Comm'r, T.C. Memo. 1980-399, the court said that nothing in the statute or the underlying regulations requires that medical-related treatments received by a taxpayer be furnished by an individual licensed to practice medicine in any particular discipline, or that the services or treatments be provided in person rather than remotely, or that the treatment be successful or universally accepted as effective.

The court was also persuaded by Malev's belief as to the effectiveness of the treatments she paid for more than its own impression as to those treatments.

Finally, the Tax Court looked at the subsequent advice of Malev's doctor that she investigate integrative medical care. The court said that the word "heal" in the definition of "integrative medical care," as defined by Duke University, was critical because, under Reg. Sec. 1.213-1(e)(1)(ii), an expense paid by a taxpayer for "healing services" directed towards any structure of the body may be deducted as a medical expense.

For a discussion of the types of medical-related payments that are deductible, see Parker Tax, ¶82,525.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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