## Facts

- Collins H. Ferris and Bonnie Bach Ferris built an enclosed swimming-pool addition to their Wisconsin home in 1971 at a cost of about $194,660.
- Mrs. Ferris had a degenerative spinal disorder; her physician recommended installation of a residential swimming pool and twice-daily use to prevent permanent paralysis.
- The Ferrises’ home was a high-end residence; the pool addition was designed to match the home’s Tudor style and quality.
- The addition included a 20-by-40-foot pool with decorative features and extensive high-cost construction materials and finishes.
- The project also included amenities and spaces such as a bar/cooking area, sauna, terrace, raised dining area, indoor sunning area, and dressing rooms.
- The taxpayers’ appraiser estimated the addition increased the home’s fair market value by $97,330.
- The Ferrises excluded some recreational/entertainment costs, treated roughly $172,000 as medical, subtracted the value increase, and claimed about an $86,000 medical-expense deduction under I.R.C. § 213 on their 1971 return.
- The Commissioner allowed only a small deduction (about $6,500), reasoning that much of the structure reflected non-medical, personal, or luxury objectives and was not primarily for medical care.
- The Tax Court rejected the Commissioner’s limitation and allowed a substantially larger deduction, treating § 213 as imposing no meaningful limit beyond removing certain recreational items and the value increase.
- The Commissioner appealed.

## Issues

1. Whether costs of a residential swimming-pool addition are deductible as “medical care” under I.R.C. § 213 when the improvement includes substantial architectural, personal, and recreational features.
2. How to measure the deductible amount for a medically motivated capital improvement to a personal residence, including the role of increased fair market value and segregation of non-medical components.
3. Whether a physician’s recommendation, by itself, establishes that the overall improvement was incurred primarily for medical care.

## Decision

- The Seventh Circuit reversed the Tax Court’s expansive allowance of the deduction and required a more limited calculation.
- The court held that § 213 permits a deduction for medically motivated residential improvements only to the extent the expenditures are primarily for medical care, excluding personal, aesthetic, recreational, and luxury components.
- The court emphasized that, for capital improvements, the deductible medical expense is generally limited by the increase in the property’s fair market value and by careful allocation among medical and non-medical elements.
- The case was remanded for recomputation of the deductible amount consistent with these limits.

## Legal Principles

- A physician’s recommendation is relevant evidence of medical purpose but is not conclusive; the expenditure must still be primarily for medical care under § 213.
- When an expenditure produces a capital improvement to a personal residence, a medical-expense deduction is generally limited to the cost in excess of the resulting increase in the property’s fair market value.
- Costs attributable to personal living comfort, recreation, entertainment, decoration, or luxury design are not deductible as medical expenses, even if associated with a medically useful facility.
- Courts require segregation and allocation: only those components reasonably required for the medical purpose qualify, and the taxpayer bears the burden to distinguish medical costs from non-medical enhancements.

## Conclusion

The Seventh Circuit held that § 213 does not allow taxpayers to treat an elaborate, value-enhancing residential pool addition as largely deductible medical care merely because a doctor prescribed swimming therapy; the deduction must be confined to medically necessary costs, excluding luxury and personal features and accounting for the property’s increased value.


Ferris v. Comm’r, 582 F.2d 1112 (7th Cir. 1978)