IRS Revenue Ruling
1999-28

 Code Secs. 213, 262

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26 CFR 1.213-1: Medical, dental, etc., expenses.
(Also section 262; 1.262-1.)

MEDICAL EXPENSES; SMOKING-CESSATION PROGRAMS. Uncompensated amounts
paid by taxpayers for participation in a smoking-cessation program and for
prescribed drugs designed to alleviate nicotine withdrawal are expenses
for medical care that are deductible under section 213 of the Code. The
cost of nicotine gum and patches available without a prescription is not
deductible as a medical expense. Rev. Rul. 79-162 is revoked.


REV. RUL. 99-28

ISSUE

Are uncompensated amounts paid by taxpayers for participation in a
smoking-cessation program, for prescribed drugs designed to alleviate
nicotine withdrawal, and for nicotine gum and nicotine patches that do not
require a prescription, expenses for medical care that are deductible
under Section 213 of the Internal Revenue Code?


FACTS

Taxpayers A and B were cigarette smokers. A participated in a
smoking-cessation program and purchased nicotine gum and nicotine patches
that did not require a prescription. A had not been diagnosed as having
any specific disease, and participation in the program was not suggested
by a physician. B purchased drugs that required a prescription of a
physician to alleviate the effects of nicotine withdrawal. A's and B's
costs were not compensated for by insurance or otherwise.


LAW AND ANALYSIS

Section 213(a) allows a deduction for uncompensated expenses for
medical care of an individual, the individual's spouse or a dependent to
the extent the expenses exceed 7.5 percent of adjusted gross income.
Section 213(d)(1) provides, in part, that medical care means amounts paid
for the diagnosis, cure, mitigation, treatment, or prevention of disease,
or for the purpose of affecting any structure or function of the body.

Under Section 213(b), a deduction is allowed for amounts paid during
the taxable year for medicine or a drug only if the medicine or drug is a
prescribed drug or insulin. Section 213(d)(3) defines a "prescribed drug"
as a drug or biological that requires a prescription of a physician for
its use by an individual.

Section 1.213-1(e)(1)(ii) of the Income Tax Regulations provides, in
part, that the deduction for medical care expenses will be confined
strictly to expenses incurred primarily for the prevention or alleviation
of a physical or mental defect or illness. An expense that is merely
beneficial to the general health of an individual is not an expense for
medical care.

Section 262 provides that, except as otherwise expressly provided by
the Code, no deduction is allowed for personal, living, or family
expenses.

Rev. Rul. 79-162, 1979-1 C.B. 1165 holds that a taxpayer who has no
specific ailment or disease may not deduct as a medical expense under
Section 213 the cost of participating in a smoking-cessation program.
However, the Internal Revenue Service has held that treatment for
addiction to certain substances qualifies as medical care under Section
213. See Rev. Rul. 73-325, 1973-2 C.B. 75 (alcoholism); Rev. Rul. 72-226,
1972-1 C.B. 96 (drug addiction).

A report of the Surgeon General, THE HEALTH CONSEQUENCES OF SMOKING:
NICOTINE ADDICTION (1988), states that scientists in the field of drug
addiction agree that nicotine, a substance common to all forms of tobacco,
is a powerfully addictive drug. Other reports of the Surgeon General have
concluded, based on numerous studies, that a strong causal link exists
between smoking and several diseases. See, e.g., TOBACCO USE AMONG U.S.
RACIAL/ETHNIC MINORITY GROUPS (1998); PREVENTING TOBACCO USE AMONG YOUNG
PEOPLE (1994); THE HEALTH BENEFITS OF SMOKING CESSATION (1990). Scientific
evidence has thus established that nicotine is addictive and that smoking
is detrimental to the health of the smoker.

Under the facts provided, the smoking-cessation program and the
prescribed drugs are treatment for A's and B's addiction to nicotine.
Accordingly, A's costs for the smoking-cessation program and B's costs for
prescribed drugs to alleviate the effects of nicotine withdrawal are
amounts paid for medical care under Section 213(d)(1). However, under
Section 213(b), A's costs for nicotine gum and nicotine patches are not
deductible because they contain a drug (other than insulin) and do not
require a prescription of a physician.


HOLDING

Uncompensated amounts paid by taxpayers for participation in a
smoking-cessation program and for prescribed drugs designed to alleviate
nicotine withdrawal are expenses for medical care that are deductible
under Section 213, subject to the 7.5 percent limitation. However, amounts
paid for drugs (other than insulin) not requiring a prescription, such as
nicotine gum and certain nicotine patches, are not deductible under
Section 213.


EFFECT ON OTHER DOCUMENTS

Rev. Rul. 79-162 is revoked.


DRAFTING INFORMATION

The principal authors of this revenue ruling are Donna M. Crisalli and
John T. Sapienza, Jr. of the Office of Assistant Chief Counsel (Income Tax
and Accounting). For further information regarding this revenue ruling,
contact Ms. Crisalli or Mr. Sapienza on (202) 622-4920 (not a toll-free
call).

<<END RULING>>
 

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