## Facts

- George R. Taylor and Pearlie H. Taylor filed joint federal income tax returns for 1982 and 1983.
- The Commissioner issued a notice of deficiency determining income tax deficiencies of $11,352 for 1982 and $11,839 for 1983.
- By the time of trial, the Taylors had conceded all issues except two: whether they could claim pass-through items from A & T International, Inc. as an S corporation, and whether lawn-care expenses were deductible medical expenses.
- A & T International, Inc. (A & T) was a Maryland corporation formed in 1982 in which George Taylor was a shareholder.
- The Taylors reported A & T as if it were an S corporation and claimed on their individual returns (a) their share of A & T’s losses for 1982 and 1983 and (b) a pass-through investment tax credit for 1982.
- The Commissioner disallowed the losses and credit on the ground that A & T had not made a valid Subchapter S election for the years at issue.
- Taylor asserted that he had instructed counsel to prepare and file the corporate paperwork and the S-election form (Form 2553), and he believed an election had been made.
- The IRS informed Taylor (in 1983) that no valid S election was on file for A & T, and the Taylors could not produce persuasive evidence that a timely, properly executed election (including required shareholder consents) had been filed and accepted for 1982 or 1983.
- Separately, George Taylor suffered from severe allergies, and his physician instructed him not to mow his lawn.
- In 1982, the Taylors paid $178 for lawn-mowing services and claimed the amount as a medical expense deduction on Schedule A.
- The Commissioner disallowed the lawn-mowing deduction as a personal, living expense rather than “medical care” within the meaning of I.R.C. § 213.

## Issues

1. Whether A & T International, Inc. made a valid Subchapter S election for 1982 and 1983, permitting the Taylors to deduct corporate losses and claim an investment tax credit on their individual returns.
2. Whether amounts paid for lawn mowing in 1982, incurred because a doctor instructed George Taylor not to mow due to allergies, qualified as deductible medical expenses under I.R.C. § 213.

## Decision

- The court sustained the Commissioner on both contested issues.
- The court held that the Taylors failed to prove A & T made a valid Subchapter S election for 1982 or 1983; therefore, the Taylors could not claim A & T’s losses or the related investment tax credit on their individual returns.
- The court held that the lawn-mowing expense was a nondeductible personal expense, not “medical care” under § 213.

## Legal Principles

- An S-corporation election is effective only if made in the time and manner required by the Code and regulations, including a proper election filing and required shareholder consents.
- The taxpayer bears the burden to prove entitlement to S-corporation pass-through treatment; absent proof of a valid election, the corporation is treated as a C corporation for federal income tax purposes, and its losses and credits do not pass through to shareholders.
- I.R.C. § 213 permits a deduction for expenses paid for “medical care,” meaning amounts paid primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease (or for affecting a structure or function of the body).
- I.R.C. § 262 generally bars deductions for personal, living, or family expenses unless a specific provision allows the deduction.
- Ordinary household or property-maintenance costs (such as lawn mowing) remain personal expenses even when incurred because a medical condition limits a taxpayer’s ability to perform the work.

## Conclusion

In *Taylor v. Commissioner*, the Tax Court upheld the deficiencies after concluding that the Taylors did not establish that A & T International, Inc. filed a valid Subchapter S election for 1982 or 1983, so the claimed pass-through losses and investment tax credit were disallowed, and that lawn-mowing payments made because George Taylor’s allergies prevented him from mowing were routine home-maintenance costs treated as nondeductible personal expenses rather than deductible medical care under § 213.


Taylor v. Commissioner, 54 T.C.M. 129 (1987)