Joseph Kuntz, III & Syrita E. Kuntz, an incapacitated person, Joseph Kuntz, III, Guardian & Conservator, Petitioners

MEMORANDUM FINDINGS OF FACT-AND OPINION

MORRISON, Judge:

The Commissioner of Internal Revenue (the IRS) issued a notice of deficiency disallowing business-expense deductions the Kuntzes claimed in 2006 and 2007 for amounts they paid to a caregiver for Mrs. Kuntz.

The Kuntzes filed a petition for redetermination with the Court.

The issue for decision is

SERVED MAR -1 2011

whether the Kuntzes are entitled to business-expense deductions for 2006 and 2007 for payments to the caregiver.

FINDINGS-OF FACT

Some facts have been stipulated.

Those stipulated facts are adopted by the Court. At the time they filed their petition, the Kuntzes resided in Idaho. Mr. Kuntz is self-employed as a tile and marble contractor.

He operates his business out of the Kuntzes' personal residence. Mrs. Kuntz has Alzheimer's disease, and her condition requires someone to be with her at all times.

Mr. Kuntz employs a caregiver to look after Mrs. Kuntz during the iay.

The caregiver also does clerical work for Mr. Kuntze's business. 5 Mr. Kuntz paid $20,184 to- the caregiver in 2006.

He paid $20,265 to the caregiver in 2007.

"On their tax returns för 2006 and 2007, ,the Kuntzes deducted the payments to the caregiver as expenses of Mr. Kuntz's tiie and marble business.

The IRS issued a notice of deficiency disallowing the deductions.

Since then, the IRS has stipulated that $2,115 of the $20,184 paid to the caregiver in 2006, and $2,115 of the $20,265 paid to the caregiver in,2007, are deductible as business exper ses because the caregiver performed The notice of deficiency included some other adjustments.

As a result of al] The Kuntzes have conceded that correct. deficiency, caregiver payments and the dther adjustments that concede are correct, notice of deficiency were $3,182 for 2006 and $5,153 for 2007 these other adjustments are the adjustments in the notice of the deficiencies in tax determined in the irìcluding the disallowance.of the deductions for the the Kuntzes now some clerical services for Mr. Kuntz's business; The IRS has also stipulated that if the Kuntzes are not allowed business- expense deductions for the, remaining amounts paid to the careeiver, they are entitled to corresponding-medical-expense deduÁtions on Schedule A, Itemized Deductions, of $13,490 for 2006 and $12,143 for 2007.

OPINION

The 'ordinary and necessary.expenses of carrying on a trade or b siness are deductible.

Sec. 162(a).2 However,spersonal and fami y expenses are not generally deductible.

Sec. 262(a).

The IRS ergues that the cost of paying the caregiver is not deduðtible under section 162(a) because it was not incurred primårily to benefit Mr. Kuntz's business and because it bears only a remote or incidental relationship to the business.

The Kunt es argue that Mr. Kuntz had to employ someone to look after Mrs. Kuntz while he was at work.

The Kuntzes must prove they are entitled to the deduction.

Tax Court Rule of Practice and Procedure 142(a).

In Smith v. Commissioner, 40 B.T.A. 1038, 1039-1040 (1939), affd. 113 F-.2d 114 (2d Cir. 1940), the Board of Tax.Appeals held 2All section references are to the Internal Revenue Code of 1986, as amended, as in effect for the years ät issue.

3Although sec. 7491(a) imposes the burden of proof on the IRS if certain conditions are met, bear the burden of proof .

the Kuntzes concede that they that a ,married couple= could not deduct the cost of paying nannies to look after their child, even though the nannies' services allowed the wife to work out side- the home. Similarly, the expense of the caregiver foè Mrs. Kuntz is not deductible even though this expense allowed Mr. Kuntz to work outside the home..4 Therefore, the Kuntzes are entitled to business-expense deductions for payments to the caregiver of only $2,115 for 2006 and $2,115.for ,2007.

In accordance with the stipulation, they are entitled to medical-expense deductions ,of- $13, 490 for 2006 and $12,143 for 2007.

To reflect the foregoing, Decision will be entered under Rule 155 .

4It is not necessary for us to determine whether Mr. Kuntz would have hired the caregiver had he had not been working. personal na-ture of 40 B.T.A. 1038 (1939), affd; 113 F.2d 114 (2d Cir. 1940), did not depend upon whe'ther 'the nanriies would have been hired had the wife not worked.

the nanny expenses in Smith v. Commissioner, The sThe Kuntzes have not claimed a credit under sec 21; which allows a taxpayer a credit caring for a spouse who is 'physically or mentally incapable-of caring for himself or herself and who has the same principal place of abode as the taxpayer" if "such expenses are incurred to enable.the taxpayer to be gainfully employed".

for a percentage of the expenses of