Deductible swimming pool?

They can be, as either recreational expenses for employees or as medical expenses.

Expenses for recreational, social, or similar activities primarily for the benefit of employees are deductible whether or not they meet the stricter tests applied to meals. Following the Jimmy Carter legacy, of course, the prohibition against club dues reamins, so you will have to build your own!

Recall that, at least subject to the 7 1/2 percent limit, medical expenses are deductible and include a wide range of items we ofter overlook. Some of these are weight-loss programs, acupuncture, alcoholism treatment, birth control pills, mileage, some legal fees, lodging, programs to stop smoking, and certain capital expenses.

Capital expenses, such as constructing special entrance ramps, widening doorways, installing railing, are deductible to the extent that they cost more than the related increase in the property's value.

For any portion of these costs to be deductible, the primary purpose of the swimming pool must be for the cure or mitigation of a physical defect or disease, rather than for the satisfaction of personal needs In addition, the deduction may be denied if there are adequate, less expensive, alternative facilities available.

For example, in Cherry v. Commissioner, T.C. Memo. 1983-470, the taxpayer was suffering from severe emphysema and bronchitis and his doctor recommended an exercise regime consisting of swimming and other exercises to regain his breathing capacity.

The taxpayer found that the availability of pools and local health spas in his community was incompatible with his work hours. He then decided to install his own pool so he could swim on a regular basis. In 1974, an enclosed pool was constructed at a cost of $40,000 with varying water depths and a diving board, but with no special design or equipment to accommodate the taxpayer's physical defects.

The court allowed the deduction, noting that the primary purpose for the construction of the pool was for medical reasons rather than for recreational purposes, based upon the following factors:

(1) The taxpayer built the pool after giving appropriate consideration to other types of exercise and to the availability of community pools;

(3) the taxpayer incurred additional costs that exceeded a purely recreational pool in order for him to exercise regularly; and

(4) given the taxpayer's condition, there was no medical reason for a pool to have any special design or equipment.

The Code and the regulations do not impose a reasonableness requirement on the amount of any deductible medical expenses (except in the case of meals and lodging). However, the courts may limit a deduction where it appears that the taxpayer's expenditures were unreasonably high.

In Ferris v. Commissioner, T.C. Memo. 1977-186, rev'd, 352 F.2d 1112 (7th Cir. 1978), the taxpayer had constructed an indoor swimming pool that was architecturally and aesthetically compatible with her residence on the advice of her physician in order to prevent paralysis as a result of a spinal injury.

The IRS argued that an enclosed pool satisfying the taxpayer's medical requirements could have been built for $70,000 and would have increased the value of her home by $31,000. It thus limited her medical expense deduction to $39,000.

The Tax Court found no authority limiting a medical expense to the cheapest form of treatment. The court reasoned that any ability to receive a tax benefit for any portion of the personal element of a capital expenditure that qualifies as a medical expense is substantially curtailed by the requirement of reducing the expense by the increased value of the

On appeal, the Court of Appeals reversed, holding that any costs above those necessary to produce a functionally adequate facility are not incurred for medical care. Ferris v. Commissioner, 582 F.2d 1112 (7th Cir. 1978), rev'g T.C. Memo. 1977-186. The court indicated that there are two acceptable ways to compute the reasonable minimum costs. One method

is to deduct from the taxpayer's actual costs a sum appropriate to account for the unnecessarily expensive building materials and methods used in the building that are greater than needed to accommodate a purely therapeutic pool. Alternatively, evidence of actual costs of other taxpayers who have constructed therapeutic facilities in the same geographic area (adjusted, if necessary, for inflation) may be used.