IRS Lactation Intolerant

This was published on PAOO on January 11, 2010. 

PLR 200941003


Somebody once told me about a tax attorney who was presented with a question that he found extremely interesting. His comment was “That is an extremely interesting question. I hope we will have a client situation that it bears on it so I will be able to research it.” For better or worse I lack that discipline and will go poking around at things that will be of little or no practical benefit. It happens that about the most, to me, intriguing ruling of 2009 falls into that category.

PLR 200941003 was about the deductibility of infant formula as a medical expense. Citing Revenue Ruling 55-261, the service held that the formula was not deductible; the reasoning was that the formula just provided for normal nutrition. I think the ruling is wrong and the basis that they used indicates that they missed the point of the ruling request. The ruling request was on the behalf of not, the presumably well-fed, infant, but rather on behalf of the mother, who as it happens, had had a double mastectomy.

The definition of a deductible medical expense is fairly broad. It includes not only diagnosis, treatment and prevention, but also mitigation. Included in the last, for example, would be the cost of a special school. PLR 200318017 allowed a deduction for the various expenses involved in arranging for an egg donation for a woman unable to conceive using her own eggs.

What I find really curious, though, is why the ruling was requested in the first place. I did some, admittedly cursory, research which leads me to believe that the dollars involved cannot possibly be substantial. The furthest out estimate for annual cost of infant formula that I found was around $3,000. $1,200 would be a more representative estimate. Regardless you are not talking much north of $1,000 in tax probably somewhat less. Furthermore, it is not as if the deal will rise or fall based on the tax answer. Conceivably you might scuttle a merger if you can’t get a favorable ruling, but it is pretty clear that deductible or not the formula will be purchased.
It would seem to be a little silly to pay for a ruling request that you might think was frivolous, so why not just take the deduction and disclose?

The only thing I could think of was to create some stir on the issue. I couldn’t find that the ruling generated much other interest though.